Throughout our ten years of working with equipment manufacturers to connect, collect, and integrate operational data with enterprise systems, we’ve seen many trends impacting industrial IoT project success. The world has finally moved beyond most of the technological limitations for building innovative solutions. All the necessary tools exist to create connected product systems that perform as expected. We do this every day. They work. Now there’s a new trend, and it’s not a good one. We’re seeing business teams at equipment manufacturers telling engineering managers and IT leaders to evaluate and choose an IoT platform for the company. Run an online demo. Read API documentation. Build a proof of concept. Compare prices. Most of these projects never see commercial light of day. They get stuck. Why? They get stuck because this approach to digital transformation is completely backward.
Evaluating the IoT platform problem
We’ve said technology isn’t the problem. Here’s the reality. The right technology for your system is available today. When used correctly by experienced teams, it will produce your desired outcomes. This is well-charted territory. You can have remote monitoring with predictive maintenance, and integrate machine data with your business workflows. These are solved challenges.
The biggest problem with technology in IoT today is a problem with the methods for evaluating IoT technology itself.
First, there are platforms that work well for your desired business outcomes and your specific business models. Also, there are platforms that work well for other outcomes, and models that are different from yours. Both groups contain “good” technology. But “good” technology doesn’t always mean good for your business. So why are engineering and IT teams spending so much effort evaluating specifications and costs without knowing what duties each will be required to perform and under what constraints? Most importantly, how much is each requirement worth to the business side of the house?
How can you choose your weapon before knowing who your opponent will be?
IoT business outcomes
What sort of IoT system will provide enough value to justify the investment. Critically, how much should you invest in the first place? This is why it’s so wrong for business teams to ask engineering and IT teams to choose the technology first. There’s no right answer independent of context.
Here’s a simplified example. A team is looking at two industrial IoT platform options. One will cost $500/month to own and operate. This could be vendor fees, support costs, cloud usage, and internal IT or development resources. The other costs $5,000/month. Both have different capabilities and options. How can an engineering manager choose which is right for the company?
The price to your company is meaningless without knowing the expected value to your customer. Unless the business team can tell the engineering team what they need the system to do, and how much their customers will pay for the new service, there is no way to know which IoT platform is the correct choice.
Finding industrial IoT Value
Let’s say the business team has an offering in mind that is worth $10,000/month to your customers. Both systems can deliver this service reliably. Therefore, the $500/month makes more sense. Now, if this one thing is all the $500/month system can do, you may be limiting your long-term potential. But you get the point. However, what if the business team needs a service they know they can sell for $50,000/month, or will generate a similar amount of internal savings? The $500/month option cannot deliver this outcome. The $5,000/month option does this and more. You see, it doesn’t matter that the first option costs $4,500 more than the second. That’s a meaningless metric. What matters is that the second option will generate $40,000/month more revenue than the first. That’s all that matters. And it’s why technical platform evaluations in a vacuum are a waste of time.
Industrial IoT business planning
So if you’re on the business team at an equipment manufacturer looking for ways to generate new revenue through connected products and services, don’t go to your engineering and IT teams first. Don’t ask them to recommend an IoT platform. Go talk to your customers instead. Find out their pain points and what they need to run their businesses better. Ask how much they would pay for data-driven insights into their operations. Work through specific scenarios and the value of each. You don’t need code for this.
Come up with a business model that shows how much revenue would be generated if you could deliver certain business outcomes for your customers. The same applies to internal cost savings, or protecting your existing revenue streams. Understand your potential returns. Then ask your engineering and IT teams for the right platform to achieve these results. Now they know what they’re looking for. They understand what level of investment is both warranted and required. They’ll make better decisions.
Beware the IoT roads to nowhere
If you’re on the engineering or IT team, and you’re driving this on your own, we have one word of advice. Stop. Without a mandate from the business side of the house, your valuable time and efforts are better spent elsewhere. We’ve seen this pattern over and over. Innovation and R&D teams end up with experiments that go nowhere. They make for great demos, but there’s no business case. Eventually they wither and die, taking careers down with them.
Similarly, if you’ve got a mandate – often actually an assignment – from the business team with requirements but no value attached, your journey will be short and full of unrealized potential. Your budget for a pilot system is likely to be so low you’ll be forced to spend it on a cheap PoC demo that doesn’t prove anything and built on throwaway code. Or you’ll get locked into an introductory SaaS offering. They’ll provide an easy onramp for the low, low cost of your soul. You’ll be entirely dependent on what features they provide you – at least up to the point when they shut down or change priorities like they’ve done for many of our current customers who learned this lesson the hard way.
Getting started with industrial IoT
It’s not hard to understand the process for preparing your enterprise for industrial IoT success. Actually taking the necessary steps can be a challenge if you haven’t done this before. And making the necessary changes to your organization can be even tougher. To get started, you don’t need to choose a platform at all. You shouldn’t be evaluating technology as a first step. Instead, you should evaluate and choose the right partner. Find someone who’s gone through this before with companies like yours, a guide from prototype to production. Skip the smoke and mirrors demo, and get on with building a successful connected product and services business.