smart ecosystem roadmap

How to Get Your Slice of the $2 Trillion Industrial Internet

The decreasing cost and increasing ease-to-integrate wireless connectivity, smart sensors, advanced processors and cloud-based services means that making your products smart is no longer a question of ability; it's a matter of will.

Dan Ostrower is the vice president of Product Development at Altitude, Inc.

Jeff Immelt, Chairman and CEO of GE (IW 500/6), recently wrote an article about making industrial equipment smart — or "connecting big iron and big data," in his parlance.

In it, he cited a study claiming that this Industrial Internet could add over €2 trillion to the European GDP alone.

For the makers of commercial and industrial equipment, that's exciting stuff.

But he left out one pretty important part: how to actually get a slice of that pie.

At Altitude, we've been working with the makers of industrial equipment — everything from portable analyzers to lab equipment — for over 20 years. And we've got some ideas to help make Mr. Immelt's wisdom just a bit more useful.

Let's assume, as a starting point, that manufacturers haven't taken the leap of making their products smart. Many industrial equipment companies haven't yet, and continue to hesitate as they embark on new design cycles. But the decreasing cost and increasing ease-to-integrate wireless connectivity, smart sensors, advanced processors and cloud-based services means that doing so is no longer a question of ability; it's a matter of will.

So in short: no more excuses.

But smarts alone is not of value. It's what manufacturers do with it.

In our work in commercial and industrial markets, we have identified three universal jobs that smart ecosystems built around industrial equipment are particularly well positioned to do.

These three jobs, each one more sophisticated and challenging than the next, form a roadmap to introducing smart ecosystems into industrial equipment and capturing the loyalty and new revenue streams that go with them.

Job 1: Ensure the Equipment Works When the Customer Needs It

Every customer of industrial equipment wants that equipment to be ready when they need it.

Nothing is worse than spending tens, if not hundreds, of thousands of dollars on a piece of equipment only to have it down at a crucial time.

Manufacturers typically address this with the break-fix model: service plans and warranties. But these are blunt instruments — perceived to be slow, expensive and ineffective.

Smart ecosystems allow equipment manufacturers to be far more responsive.

Built-in sensors can monitor equipment, and connectivity can relay it. Service technicians can be connected remotely and in real-time. Algorithms, in the cloud or the product, can be used to diagnose faults, suggest fixes, or even self-heal. And when equipment has more uptime, more value is generated.

GE embeds 5,000 smart sensors in its GEnx jet engine to increase reliability so that it can move from selling engines to selling uptime and capture more of this value. But this job doesn't just apply to "big iron."

From portable instruments, to the lab bench, to transportation equipment, customers want to know that it'll work when they need it to and smart ecosystems can help, while opening new business opportunities to the manufacturer.

Job 2: Make the Customer's Employees More Productive

Specialized experts with extensive training and knowledge are often the users of industrial equipment. The businesses that employ them have an interest in making these scarce experts more productive while also getting more use out of lesser-trained employees.

Smart ecosystems can help them do this.

The use of thermal cameras in factories serves as an instructive example. For a number of years, manufacturing companies have used handheld thermal cameras to prevent machine failures.

A highly trained expert would travel from facility to facility using a $50,000 camera to photograph and analyze equipment, writing reports to management when he or she found something of concern. But as prices of cameras have fallen, companies want to put them in more hands to gather more images, more often in the hopes of preventing more failures.

But the challenge is training. Thermal imagery isn't easy to analyze and the cameras can be difficult to use properly.

The answer is smart ecosystems.

Intelligent cameras connected to a network can be used to distribute training or can "instruct" untrained operators to use them properly in real time.

For instance, a smart camera could help an operator point it at a piece of equipment the same way each time so images can be compared. Data can then be piped back to central databases where, if not subjected to automated cloud-based analyses, experts can spend their time interpreting it instead of traveling around and collecting it.

The economic impact of this shift can be substantial and equipment manufacturers can reap the rewards through higher prices, feature upgrades and recurring service revenues.

Job 3: Perform A Business Function for the Customer

The final opportunity stems from the realization that industrial equipment is used to perform a higher business function — thermal cameras are used to prevent equipment failures. Trucks are used to deliver orders. Materials analyzers are used to help refineries pass government safety inspections.

If the equipment is smart enough — if it gathers data on its use and its environment and analyzes the data in intelligent ways — then its manufacturers can begin providing value-added service and advice to help customers meet those business objectives.

The thermal camera manufacturer can schedule and specify preventative maintenance. The truck manufacturer can provide logistics services. And the materials analyzer maker can produce full safety reports.

Using smart ecosystems to help customers deliver business results is the pinnacle of smart ecosystem evolution for equipment companies, moving them from long-cycle capital purchase business models to high periodicity value delivery.

Conclusion

These opportunities represent a significant transition for industrial equipment manufacturers — one that companies can only be expected to make over a period of years. But the technology is there, consumer markets are pointing the way and customers are showing demand. To get their slice of a $2 trillion pie, industrial equipment manufacturers should focus on these three jobs to create a roadmap of smart ecosystem evolution.


As a vice president at Altitude, Dan Ostrower is responsible for the insights and strategy practice. With almost 20 years of experience in strategy and innovation, he has brought groundbreaking new technologies to market and has helped transform some of the country's biggest companies.

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