IoT isn’t about data, it’s about creating new business opportunities (Reality Check)
Over the last decade, the Internet of Things (IoT) has allowed organizations to gather data from machines that have never produced data before. As time has gone on and the cost of technology has decreased significantly, this data is now being collected in economical ways.
But collecting vast amounts of data at low costs has never been the central goal of the IoT revolution. The real question is, what do we do with all this data? The answer is to transform it into insights and actionable business opportunities. Using artificial intelligence, edge computing, and other powerful capabilities, we can realize the ultimate goal of IoT.
This allows users to focus on business outcomes, which is the main objective of a well-implemented IoT solution. In fact, thinking of IoT purely as a “technological upgrade” is a common — and potentially crippling — mistake.
Like the personal computer or the smartphone, IoT is evolving into a fundamental business necessity, one that transcends the moniker of “technology” entirely. In turning data into business outcomes, the IoT becomes something much bigger than a technological component. It becomes your most valuable weapon, a critical piece of infrastructure that can optimize, streamline, define, and even invent parts of your business. The insights gleaned from IoT solutions will help drive the next 50 to 60 years of business.
These benefits go well beyond seeing when a piece of machinery is not performing at its highest level or predicting when that machine is going to need service. Those are fairly basic applications of what the IoT’s combination of sensors, connectivity, and smarts can do. A deeper and more complex example of how the IoT can have transformative effects on business outcomes comes from the developments now taking shape in the world of manufacturing.
Consider the business relationship between manufacturing companies and their customers. Traditionally, if a customer of a manufacturing company needed industrial equipment to build products, the first step would be to purchase that asset. Purchasing industrial machinery may involve an investment of millions or thousands on behalf of the customer, and that’s just the price of admission. As a result, equipment manufacturers are under a lot of pressure to reduce the cost of their equipment.
But here’s the thing: For the customer, only about 20 percent of the total transaction is spent on buying that asset. The other 80 percent of spending goes toward operating that machinery over time and maintaining, servicing, and repairing that asset — often through a third-party service provider. And although those services cost much more than the asset over time, the customer isn’t questioning the pricing of those service providers nearly as much as the pricing of the equipment provider.
Here’s where the IoT comes in, delivering brand-new opportunities for the equipment provider and their customers alike. With an effective IoT implementation to gauge usage times, diagnose system health, predict maintenance needs, and help guarantee 100 percent uptime, that same equipment provider can play in the subscription economy. It can offer its customers a pay-per-use model with service and maintenance costs bundled into a monthly fee, with robust and accurate reporting of the asset’s operational data. For an equipment provider, the benefits are clear: Instead of a one-time charge for equipment, they can expand revenue streams by implementing a recurring subscription payment.
Those benefits extend to the customer as well. Instead of paying a healthy upfront sum for the asset — as well as unpredictable service and maintenance fees over time — they simply pay a certain amount per month based on usage. All the service and maintenance fees are bundled into that monthly amount. What’s more, shifting capital expenditures (CAPEX) such as the cost of buying equipment to operational expenditures (OPEX) such as the costs of leasing equipment can have significant tax benefits.
Most importantly, these “equipment as a service” subscription models aren’t just a pipe dream. They’re already happening in the automotive industry. Ultimately, efforts like these can serve as an example of what happens when IoT becomes more than an abstract data-collection mechanism. The near future of industrial IoT adoption relies on educating similar markets and showing them the tangible benefits of what’s possible.