Thinkstock, Getty Images
Various currency symbols against a tech background

Make the IIoT Work for You … Financially

July 26, 2017
MAPI partners with PwC for a new survey that presents a blueprint for moving past the hype and monetizing the Industrial Internet of Things.

Even now, surveys and reports focused on the Internet of Things (and on the Industrial Internet of Things) tend to hype the technology more than anything else. How many devices will we use? What will they be able to do? What new frontiers will be opened?

Which is why a new survey from MAPI and PwC is so refreshing to read: in less than 20 pages, Monetizing the Industrial Internet of Things dives into and breaks down exactly that topic. Oh, the companies managed to squeeze in the necessary amount of hype (the number of connected devices is still expected to top 20 billion in 2020, and today is around 8.4 billion — or “put another way, the global population of connected things has already eclipsed the world’s human population”), but they also pack in plenty of meat.

Should manufacturers monitor product performance and charge a separate premium for apps or web-based tools, cybersecurity, data storage, or software updates? Should they employ a subscription service or a product suite that provides predictive maintenance alerts or prescriptive insights? What about IoT-driven field services? More data could lead to more questions, but it could also lead to more revenue.

“There are numerous factors driving the development of IoT-enabled products, chiefly revenue generation, gaining a competitive edge, satisfying customer demand, and customer stickiness,” MAPI and PwC wrote. “To achieve these aims, companies are developing business models that hinge on new relationships with customers and a host of other stakeholders. These business models expand from the transactional (product sale and, in many cases, after-market parts and service) to those that offer IoT-generated data — and the services, insights, and solutions that derive from that data.”

“Most manufacturers have no shortage of data,” Ed Abbo, president and CTO of C3 IoT, an AI and IoT application development platform provider, seconded in an interview conducted for the survey. “But committing to getting the most out of that data is another matter. It is CEO-led mandates for digital transformation initiatives that are driving the large and growing market opportunity for a new generation of enterprise software that leverages big data, AI, and IoT at industrial scale.

“If companies can’t get this right, they will be at a competitive disadvantage.”

Because what, really, is the purpose of the IIoT if not to increase revenues and efficiencies in tandem?

Monetizing the Industrial Internet of Things also includes numerous key findings that might surprise, or might just reinforce current notions. Among them:

The number of IoT deployments is increasing: 38% of manufacturers now offer IoT-driven products and services, and an additional 48% are in the process of developing them. That works out to a little more than three of every four companies in the industrial space being either right there when it comes to the IIoT, or at least being really close.

And revenue is starting to approach some significance: Manufacturers expect revenue driven by IoT-based products and services will increase an average of 10% of total company revenue between now and 2022. (Right now, about 80% of manufacturers are investing in IoT product and services development, with 40% of those companies budgeting anywhere from 5% to 20% of their R&D spend on the tech. Among those 80%, a little more than 40% have already seen returns of up to 5% of their total revenue last year. Looking ahead, 42% of respondents expect 10% to 20% of their total revenue to be driven by IoT products and services.)

Why do manufacturers turn to IoT-driven products and services? The three biggest reasons are customer demand (49%), new revenue and ROI prospects (61%) and, most important, competitive pressures (also 61%).

Bundles are cropping up more often: 47% of manufacturers that offer IoT products and services are selling customer-managed IoT platforms (like bundling related data-gathering and analysis tech, or just selling software used on the platform).

Where to go from here? Just 14% of manufacturers, about one in seven, have created go-to-market IoT strategies, with about half somewhere in the creation process. That suggests that some companies are diving into the space and offering IoT products without a clear strategy to market them.

Five basic questions for manufacturers as more and more wade into really monetizing IIoT: What do our customers want to gain from it? (Among the companies not offering any IoT services just yet, more than half responded that they don’t because there’s “no customer demand” and almost that many said there’s still “unclear return on investment” or “no proven solutions.” They are fair concerns, of course, though perhaps a little surprising at this point.)

Will customers want it enough to pay for it?

What do we want to get out of the IoT products and services space?

Will it incentivize customer retention?

And what value can IIoT deliver internally in productivity improvement — both within the four walls and across the supply chain?

And a five-pointed plan, of sorts: ID what you can do, and ID realistic entry points or expansion plans, because your competitors probably have a strategy, too.

Define and demonstrate how IoT products and services create value for you, and be ready to move quickly past early challenges.

Develop an effective IoT go-to-market strategy.

Create a scalable (and — this is the trick — future-proof) IoT business models, then develop them through an entrepreneurial culture.

And learn from our products and your customers to improve, accelerate, and scale up your IoT products and services.

Also of interest, especially for companies still exploring the IoT space: about three of every four manufacturers “leveraged internal resources” to build their IoT products and services strategy. Makes sense. But 26% sought out partnerships and/or acquisitions, or hired an IoT specialist vendor. 25% also purchased an IIoT platform developed by a third-party provider. There are options.

Oh, finally, for the record, PwC and MAPI surveyed 66 manufacturers — an admittedly small sample size — almost all of them either OEMs (62%) or Tier 1 suppliers (32%). The 56 publicly-held companies the participated reported a combined $287 billion in annual revenue, with about two-thirds of all respondents somewhere between $1 billion and $5 billion.

About the Author

Matt LaWell | Staff Writer

Staff writer Matt LaWell explores news in manufacturing technology, covering the trends and developments in automation, robotics, digital tools and emerging technologies. He also reports on the best practices of the most successful high tech companies, including computer, electronics, and industrial machinery and equipment manufacturers.

Matt joined IndustryWeek in 2015 after six years at newspapers and magazines in West Virginia, North Carolina and Ohio, a season on the road with his wife writing about America and minor league baseball, and three years running a small business. He received his bachelor's degree in magazine journalism from Ohio University.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!