There is no question that IoT is very high on the priority list of many manufacturers, whether that is to embed into products sold to customers (consumer and industrial) or to improve their own operations.
However a new report on the topic from MAPI –the Manufacturing Alliance and PwC notes that there is much uncertainty over what IoT path these manufacturers should follow.
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| There are certainly bullish expectations for revenue creation as a result of IoT-based products. |
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The reality, the reports notes, is that "nearly anything could become part of the Internet of Things. But should it? And, if so, why and how?"
These are simple but very consequential questions.
Consider the car, for example. The report quotes one expert as saying "Take a vehicle, which could provide thousands of data points. Which ones of those are critical, and which ones are simply noise?"
The report notes that as manufacturers develop IoT offerings, they need to determine what data from those offerings is critical for the consumer or business customer, not-so-critical, or possibly even frivolous.
In support of the report, PwC and MAPI conducted a server of manufacturers on a variety of IoT- related topics. The data show IoT is having an impact on nearly all US manufacturers. The survey found nearly 90% of industrial manufacturers either are currently offering IoT-driven products and services to customers or are in the process of developing them. This compares to a 2015 PwC survey of US manufacturers which found a lower 69% of manufacturers had either been embedding sensors in products that enable end-users/customers to collect the data or planned to do so in the future.
However, that 90% data point cited above includes 48% that are just getting started in IoT-enabled products.
The survey also found that 31% of manufacturers are implementing IoT-related enhancements to their internal operations, and 56% are exploring the opportunities. Those companies are looking to cut costs though IoT-driven operational and supply chain efficiencies and predictive maintenance of assets.
The report notes the extreme challenge manufacturers face in making a variety of technical decisions now such as communication technology, data management platforms, app development and more in a technology that is in the earliest stages of maturity when companies need to find some way to "future proof" their IoT products and operational deployments. And on the operational side, is what manufacturers need really more data? Most aren't well leveraging all the data they already collect, the report says. Yet, IoT is frequently included in the strategies of "digitizing"companies that are such a high priority in many companies today.
5 Key Questions
There are five key questions manufacturers considering IoT should answer, the report says.
- What do our customers want to gain from it?
- 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?
- What value can industrial IoT deliver internally in productivity improvement—both within the four walls and across the supply chain?
"Getting these questions wrong could mean spending a considerable amount of time and capital on an IoT offering that is unneeded or unwanted," the report notes.
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The report, for example, quotes one manufacturing executive as says "Our biggest challenges [in developing our initial IoT-enabled products] were figuring out how we could actually demonstrate how IoT-enabled products can help them [the customer], and deciding what data, specifically, customers really need and want, ensuring we provide that data to them easily, and, most important, if all of that can justify an adequate return on their incremental investment."
There are certainly bullish expectations for revenue creation as a result of IoT-based products. As seen in the charts below, the 52% of manufacturers that get no revenue from IoT products and services currently will fall to just 13% in five years, the survey found, and significant percentages expect IoT related revenue to rise to 5 to 30% of total revenues in the next five years.
Source: MAPI and PwC
In the end, PwC and MAPI have five key recommendations for manufacturers relative to IoT:
1. Identify do-able, realistic entry points (or expansion plans) into the IoT products and services market— your competitors likely already have a strategy.
2. Define and demonstrate how IoT products and services create value for your customers and your company. Be agile at proof-of-concept stage and be prepared to move swiftly past early challenges.
3. Develop effective IoT go-to-market strategies to effectively support your IoT products and services offerings.
4. Create scalable and future-proof IoT business models and promote an entrepreneurial culture to develop them.
5. Learn from your products and your customers to improve, accelerate, and scale up your IoT products and services.
The full report is available here: Monetizing the Industrial Internet of Things
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