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IIoT Innovation: new business models beyond efficiency improvements

If you think that Industrial IoT (IIoT) is like consumer IoT but in an industrial setting, you might have to think again. Although cost, compute and storage capacity, and connectivity are equally important, in IIoT we are talking about industry quality, robust security and stringent return on investment. IIoT is built on the intersection between operational technology (OT) and information technology (IT) that enables manufacturers to connect physical assets to the digital world. McKinsey estimates that a 1% savings from efficient IIoT solutions means a $100B market opportunity.

Many industrial organizations are using IIoT to improve the health and performance of their existing assets and drive new operational insights that enable them to boost productivity. Well known examples (or use cases) include empowering the workforce with the right info when and where they need it, reducing idle time in assembly lines, reducing downtime of machines, performing asset tracking, decreasing lead times of multiple flows in assembly, increasing first pass yield and reduction of waste, detailed guiding of autonomous vehicles on factory floors, and many more. The business impact of these initiatives is important according to a Siemens Mindsphere study reporting reduction of downtime by 10% through predictive analytics on robots, reported savings of 30% on maintenance costs through predictive maintenance on AC units, to name a few.

IoT offers value across the whole organization: it improves the efficiency of operations, it provides insights to the supply chain on how a product is made and how it works, and it can be used for improved marketing campaigns. The value that IIoT can bring above and beyond the direct business benefits is also becoming better understood. Think about benefits such as improving worker wellbeing, increasing operator safety and increased engagement and motivation – all indirectly increasing revenues – but also becoming a transformative capability for the whole organization. 

IIoT’s biggest opportunity however is connecting things with new business models. Consider a maintenance engineer in the field using augmented reality (AR) to diagnose machinery equipped with IIoT devices and guided by a home-based expert worker using digital twin technology. Outfitting equipment with built-in sensors allows it to be sold as both a product and a service rather than just a product. Monitoring the equipment remotely allows to deliver maintenance, repairs, and upgrades automatically. Based on that real time information manufacturing companies can focus on the work at hand instead of worrying about the condition of the equipment. 

PTC reports that equipment manufacturers are digitally transforming their customer relationships through IIoT. They’re moving beyond selling a machine to providing ongoing value throughout the life of a product. Digitally transforming service lowers costs and drives more service revenue. Companies can expand on this value, exploring new business models like selling outcomes versus products or shifting to a predictive service model.

Another area that needs new business model thinking as a result of the COVID-19 crisis is the move from large-volume and just-in-time manufacturing towards more flexible and resilient production. This comes on top of an ongoing trend towards more personalized and customized manufacturing. Important in both the ongoing drive towards efficiency improvement, and the uptake of new business models are a sound digital technology infrastructure that is integrated both from an operations technology (OT) and an IT point of view. Novel technologies such as IIoT are a source of innovation in the manufacturing field.

Thierry Van Landegem is the Executive Director of the Accelerator program at mHUB, the leading independent hardtech and manufacturing innovation center. The Accelerator fast-tracks early-stage and high-potential physical product startups through customer validation, rapid prototyping, business modeling and customer piloting in a hardtech ecosystem of industrials, investors and mentors. Prior, Thierry focused on product incubation and startup launches in company builders and corporate venture organizations in various industries such as telecom, IT, automotive and manufacturing. He also ran the global operations and open innovation activities whilst at Bell Labs and Alcatel. His focus is working on projects that are impactful, augment people’s lives and support the environment.