IIoT platforms: The technology stack as value driver in industrial equipment and machinery

IIoT platforms: The technology stack as value driver in industrial equipment and machinery

IIoT platforms: The technology stack as value driver in industrial equipment and machinery

Equipment and machinery companies considering a transformation to embrace the Industrial Internet of Things (IIoT) need to develop a clear perspective to drive impact at scale.

Sell quality hardware. This was once the undisputed business model of traditional industrial equipment and machinery companies. As a growing number of components become commoditized, however, companies are finding that the formula for success has to change. Commoditization, along with intensifying global competition and a shift in technology stack value pools, is compelling industrial equipment and machinery companies to allocate resources that have been solely dedicated to hardware toward digital (Exhibit 1).

Intensifying global competition and increasing commoditization are shifting value pools from machinery products to software and services.

Seeing the limits of hardware-driven growth, industrial equipment and machinery companies are looking to the Industrial Internet of Things (IIoT) to develop new customer-oriented, revenue-boosting business models. On the operations side, IIoT could increase production efficiency. Whether the focus is on revenue from new business models, savings from more efficient production, or both, digital-enabled advances in manufacturing require IIoT transformation.

The global market for IIoT-enabled business models in the industrial equipment and machinery space is expected to grow substantially, and linking industrial automation and IIoT platforms is considered the industry's new frontier. The monetization potential of IIoT platforms and IIoT platform-enabled applications is massive, but implementation is still in its early stages.

Due to the importance of IIoT platforms to the industrial equipment and machinery sector, industry players should sooner rather than later develop a clear perspective for their organizations. This perspective needs to identify several essential topics, including the related value at stake for revenue and profit, the expected time frame of the development of the market, technical enablers that should be put in place, the optimal level of investment in technologies and services, and the capabilities and partnerships to be built to support success.

Benefits well worth the (sizable) effort

Preparing for and implementing IIoT is not without its hurdles, namely one of architecture complexity that makes integrating machinery operations especially challenging. Industry architecture standard ISA-95 addressed the complexity rising out of global production and distributed supply chains but does not address the myriad data and security issues brought on by countless connected devices. Creating solutions here will be no small feat, but successfully addressing these challenges will open the door to use cases that facilitate a massive business opportunity:

  • Device-management platforms. IIoT platforms support the development and deployment of applications that manage a potentially vast number of connected devices. These platforms simplify the complexity by zeroing in on the common technology needs of a diverse set of applications, devices, and uses.
  • Industrial automation and shop-floor communication. IIoT technology presents an opportunity for substantial IIoT revenue growth and margin expansion in industrial equipment and machinery. Platforms, software, and app development are the elements of IIoT that are expected to grow, while others, such as device cloud connectivity, have likely plateaued (Exhibit 2). Still others, such as hardware without service enablement, are expected to shrink. Industrial automation and shop-floor communication equipment need to be integrated into the platforms of industrial equipment and machinery manufacturers to increase the profit margin of the services portfolio. Machine overall equipment effectiveness (OEE) optimization, predictive maintenance, and cross-vendor shop-floor integration are among the most promising applications.
Growth in Industrial Internet of Things revenue will be driven by platform, software, and app development.

Strategic considerations of an IIoT transformation

Industrial equipment and machinery players will want to make honest assessments of their current capabilities and challenges. They should also carefully assess their use-case and platform options before embarking on an IIoT transformation:

  • Understanding your own starting point. Machinery and equipment players fall into one of four categories along the dimensions of technological maturity on the one hand and strategic and organizational maturity on the other hand: mature in both dimensions (“leaders”), rather immature in the former dimension (“interested players”), rather immature in the latter dimension (“stuck players”), or immature in both (“avoiders”). A player’s category will, at least in part, determine the priorities of its IIoT strategy and outline the road map for its transformation.
  • Identifying use cases. Assessing a use case’s potential value, determining which monetization logic is most appropriate, and defining its technical and organizational requirements help establish its priority over other potential use cases. It is important for each use case to have a clearly articulated and measurable value proposition.
  • Determining an IIoT platform’s value. Industrial equipment and machinery players will need to evaluate how much a platform offers regarding data ownership and contractual freedom, as well as how much growth and scale it can accommodate. The platform’s technological capabilities along the entire stack and its overall operational performance must also be assessed.
  • Choosing a monetization strategy. For “new revenue” use cases—such as software as a service (SaaS)—industrial equipment and machinery players will need to develop competitive pricing models and implement mechanisms that facilitate payment. “Revenue-enabling” use cases support the revenue generation of businesses, new or existing, via up-selling, cross-selling, or efficiency gains.

Key commitments and principles to guide the IIoT journey

There is certainly no single, standardized approach to getting started and enabling an organization to implement and monetize IIoT platforms. Our findings concerning IIoT platform implementation and monetization, as well as our observations of the most successful players in adjacent industries with similar digitization challenges, however, reveal effective approaches and perspectives that aspiring players in the digital industrial equipment and machinery space might adopt to achieve impact at scale:

  • Set the ambition at the CEO level. IIoT platform monetization entails a profound rethinking of the value chain for the industry’s players, potentially involving new revenue streams and capabilities, as well as cannibalization.
  • Focus efforts on a limited number of relevant use cases. The players most likely to achieve sustainable success in IIoT platform monetization will be the ones who focus on a limited number of use cases—instead of trying to target as many use cases as possible.
  • Do not be afraid of workarounds today while laying the IT foundations for a more robust solution tomorrow. Numerous organizational capabilities are required for long-term IIoT platform monetization success, but excelling in each area is not a prerequisite to getting started. Industrial equipment and machinery players should act early in the areas where they are most prepared, create interim solutions to address gaps, and work on building more permanent capabilities that allow them to achieve even greater success in the future.
  • Build an ecosystem of business and technology partners. As described above, part of the capability building needed will require working relationships with a wide array of external players and institutions. Companies should begin thinking about which aspects of IIoT platform implementation and monetization they want to “own,” as well as which are best addressed through outsourcing, long-term collaboration, or other types of partnerships. They should then start identifying who those partners might be and engaging them pragmatically.
  • Build a strong internal team with an agile mind-set. To fully capture value from IIoT platforms, companies need to build up strong internal capabilities and establish a dedicated cross-functional team that drives innovation based on a culture open to change and experimentation. This team must be located outside of the organization if internal processes are not agile enough to allow for development and field testing of IIoT-platform-enabled use cases at “high-tech player” speed.

Among industries, the industrial equipment and machinery sector—with its highly automatable tasks and increasingly connected devices—has especially great potential to benefit from IIoT platforms. Testing the first prospective applications of IIoT platforms in your company does not require long preparation or a large up-front investment. Jumping in provides the benefit of producing early results and helping your company make quick progress on its journey to becoming an organization that almost immediately embraces the full potential of intelligently linking IIoT platforms, enterprise applications, and shop-floor systems toward a seamlessly integrated industrial software stack.

What are you waiting for?

Download Leveraging industrial software stack advancement for digital transformation, the full report on which this article is based (PDF—7.8MB).

About the author(s)

Lea Bolz is a consultant in lapetitemort.info’s Frankfurt office, Heike Freund is an associate partner in the Munich office, and Tarek Kasah is a consultant in the Düsseldorf office, where Bodo Koerber is a partner.

Related Articles

www.agroxy.com

http://apach.com.ua/shop/category/elektromehanicheskoe-oborudovanie/miksery-planetarnye

фундаментные блоки