A few days ago I was involved in a discussion about Internet of Things (IoT) and I realized that most people think about IoT in terms of technology. But, in order to be successful, a technology has to be adopted by the business and this requires change in the business model as well as in the mind-set of the management.
But how easy it is for models and mindset to get changed?
We’ve been in the field of IoT for more than 2 years with our own project HutGrip (www.hutgrip.com). HutGrip is a Cloud-based SaaS for equipment manufacturers (OEMs) which provides efficient automated remote monitoring and traceability of equipment parameters by replacing VPNs with the Cloud and real-time data analytics. In the past 2 years we’ve had the chance to talk to executive managers and engineers and we’ve seen how easy it is for them to understand the technical side of integrating IoT-based solutions (such as HutGrip). However, they find it hard tofit and see the benefit from the new services enabled by the IoT technologies. Moreover, the lack of clear and proven business models combined with the conservative mindset leads to inability to monetize form these new services. And if the businesses cannot calculate the ROI they will not invest a penny in new technologies.
How IoT changes the existing business models?
First and foremost, IoT changes the way we communicate with our customers. Before IoT we had mostly reactive communication: in case of a problem the client is the one who initiates the dialog.
With connected devices, where the equipment sends operational data to the OEM, the proactive party is the OEM: the company knows exactly what’s wrong even before the customer. Thus, the business model for the OEM in this scenario could be shifted from selling equipment to selling operational time.
Another example for proactive communication is providing preventive maintenance as a service. Every equipment comes with its recommended maintenance plan which customers follow with the hope that the machine will work as expected. But certain factors like environment temperature and humidity, human behaviour, quality of spare parts and supplies might affect the maintenance needed. Before IoT, it’s the maintenance engineers who are expected to handle this. With an IoT solution, the OEM company can provide just the right preventive maintenance based on data gathered from the working equipment.
How does the above change in communication flow affect business models and mindsets? With IoT:
- customers buy machine uptime
- OEMs keep being responsible for the machines;
- customers pay OEMs for preventive maintenance instead of relying on internal staff
- OEMs apply all their knowledge during the whole machine lifecycle – design, usage and disposal;
- customers share with the OEMs data on how they use the equipment in reality
- OEMs make modifications based on real customers needs
As a result, the OEM customers get reduced downtime caused by equipment breakdowns, reduced maintenance costs and productivity losses. Thanks to preventive maintenance the OEMs spend less time/costs on time-critical technical support and shorten their R&D cycle.
It’s true that the manufacturing industry is conservative and the above business model changes can take years to get accepted. But, if OEM companies and their customers make an effort to understand and calculate the huge ROI resulting from those, IoT-based solutions are bound to become successful.
Technology alone is not enough; the changes on the business side are the key factor for the success and adoption of IoT products and services.
HutGrip is an industrial IoT solution developed and owned by IndigoVerge. If you are interested in IIoT consulting and implementation for a similar or another IoT project, please get in touch with IndigoVerge team.