The internet of things (IoT) is coming of age. One indication is that the focus on consumer applications that dominated the early years of the IoT — think smart home device automation, home security and energy management — is expanding to include broader enterprise adoption, as evidenced by a 2017 McKinsey study that found “98 percent of survey respondents reported that most companies within their industry include enterprise IoT initiatives in their strategic road maps.”
Enterprises need and want different things from IoT products than what many consumer IoT applications provide. As the chairman and founder of an IoT company, I’ve seen that enterprises engaged in larger digital transformation initiatives, which entail using digital technology to overhaul the fundamentals of how they do business, are deploying IoT solutions to optimize their internal operations, boost revenue streams and support their efforts to become more nimble, agile and efficient.
Moreover, there are a broad array of companies that are able to provide products and expertise to get these initiatives started, whether they are IoT platform providers, the large cloud providers, system integrators or targeted vertical IoT product companies.
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Some of the main use cases I see for enterprise IoT today revolve around asset management, tracking and tracing. Examples include:
• Minimizing equipment downtime: You can use IoT to help fix or even prevent failures in equipment such as heating, ventilation, and air conditioning (HVAC) systems, agricultural machinery and commercial boilers.
• Optimizing replenishment revenues: The classic razor/razor-blade model for retail revenues is being updated and expanded with the IoT to encompass asset management. Enterprises with offerings that include something that needs regular replenishment or replacement — whether that’s coffee bean supplies or HVAC filters — can create IoT solutions to reduce waste and lower service costs.
• Controlling inventory costs: You can create IoT solutions to track inventory and stock levels remotely, continuously, and in real time. IoT-based inventory management systems can not only alert companies when inventory levels are getting low, but also refill stock automatically.
• Reducing risk and streamlining compliance: Being out of compliance — whether for a shipment of frozen meat to a grocery store or blood samples to a medical lab — can put people’s health and safety at risk, and it can be very expensive. You can use IoT devices to track and trace perishable goods for improved risk management and compliance.
Why even start a digital transformation project? You should have a clear understanding of the return you expect and a reasonable idea of how much of an investment you’ll need to make to achieve it. Both of these steps are challenging, especially if it is the first major digital transformation project your enterprise is undertaking.
Get internal experts to help understand the potential return. A critical ingredient to success is getting participation and buy-in from the appropriate people in the company. For example, if your goal is to reduce equipment downtime and to also reduce truck rolls related to costly field maintenance, you should engage the product manager and the finance, engineering and support teams to make sure you have all available information. Get the knowledgeable people at the company on the same page and ask them to help you understand the challenges and benefits.
Review different investment and timing scenarios for IoT digital transformation. Today, there are multiple options for pursuing digital transformation. The path a company chooses depends on its appetite for risk, time-to-market goals, and of course, the amount of investment they are willing to put toward the digital transformation project. Like with any true return on investment (ROI) analysis, time is a critical element. Make sure to include the investment you’ll make over time in your return analysis, with the goal of understanding the break-even point for the investment and how much capital you’ll put at risk before that happens. Companies should determine the investment they’ll need to make by getting quotes from outside third parties for any services required and calculating their own costs for labor or resources. Other costs may include product costs for platforms, cloud or server costs, and of course, the ongoing upkeep of the technology — both in terms of technology cost and internal engineering resources.
Be agile with investment and learn fast. It is a great idea to consider digital transformation in stages. Leverage agile methodologies for adopting any benefits you hope to gain. Whether you choose to build all the related technology internally or to leverage outside partners, your longer-term goals can usually be broken down into smaller wins. This enables the company to learn quickly, and just as importantly, to minimize upfront investment. For example, if a company wants to monitor their shipped products from warehouse to store, they can build a few prototypes with basic data streaming into very simple applications in a matter of months. This doesn’t mean that this will be how the company will finally scale their digital transformation. It just provides a quick path to get started and requires minimal investment from internal resources and large asset or technology purchases. Companies often find during this early stage that the key hurdles are not related to technology but to how their channel or partners operate and how to incentivize changes in behavior.
Essentially, any company can connect almost anything using the IoT with the ability to provide two-way data to applications and enable digital transformation. By digging into the ROI of a digital transformation project up front, companies have a much higher likelihood of success.