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Internet of Things
Why it demands not only new technologybut also a new
operational blueprint for your business
ii
At a glance
Across the world, forward-thinking manufacturers supported by transformed operating and business
and industrial product companies have made great models designed specifically for an IIoT-enabled
strides in connecting their products and appliances world. And its a disruption thats coming faster than
to the Industrial Internet of Things (IIoT). But most companies think. Those manufacturers that
succeeding in the IIoT era demands much more move to tackle the necessary transformation today
than technology connectivity. In fact, the advent will position themselves as future leaders in their
of the IIoT is a once-in-a-lifetime business markets. Those that fail to act now risk being left
disruptionone that requires new capabilities behindand will face a real struggle to catchup.
in managing direct relationships with customers,
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Combined, businesses,
governments and
consumers will invest
nearly $1.6 trillion
to install IoT solutions
in 2020.
Source: BI Intelligence, THE INTERNET OF THINGS 2015: Examining How The IoT Will Affect The World, November 2015
Picture the scene: Youre the CEO of a company On the customer front, theres a growing trend
that manufactures Heating, Ventilation and Air for consumersand also business customers
Conditioning (HVAC) units for consumers. Youve to want direct links to the companies that
seen and embraced the emergence of the IIoT, and manufacture the products and services they use,
have invested accordingly in establishing Internet cutting out the traditional middlemen. This
connectivity for the HVAC systems you sell. profound behavioural shift is evident across a
host of industries, from energy to telecoms,
As a result, you can monitor and maintain your and from mainstream media to technology.
HVAC systems performance remotely in peoples Its one of the key drivers of manufacturers
homes, detect imminent leaks or failures, and industry-wide move into servicesa change
alert your customers to possible problems. But that increasingly involves progressing from
your customers satisfaction with your offerings product-based to service-based offerings by
seems to be falling rather than rising. Why? building platforms, thus simultaneously
expanding revenues and building stickiness
The answer lies in the changing expectations and
(see Figure 1).
demands of todays connected consumers
but also in the pervasive impacts of the IIoT on Meanwhile, on the operational front, the fact is
your operations and business model. Put simply, that Internet connectivityfor a HVAC system
connecting appliances and devices to the Internet or any other piece of equipment, whether a brake
is perhaps the easiest part of the challenge of pad or a turbine enginemeans much more than
dealing with the IIoT disruption. Alongside the just linking it digitally to your business systems.
technology, its every bit as important to address It also represents a way of getting closer to end-
the behavioural, operational and business model users than ever before, creating a degree of direct
impacts it brings with it. customer engagement and interaction that most
manufacturing companies have never experienced.
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On the customer front, theres a growing trend for
consumersand also business customersto want
direct links to the companies that manufacture the
products and services they use, cutting out the
traditional middlemen.
Figure 1: Companies moving from product-based offerings to service-based offerings by building platforms,
expanding revenues and building stickiness
Revenue Expansion
Customer Engagement
Platform
-as-a-Service
Product
+
Value-add Service
Product
+
Remote Support
Stand-alone
Product
IoT Services Roadmap
Source: PwC
Figure 2: The need for a robust operations architecture alongside the data delivery architecture
Customer
Relationship
Management
Operations
Support
Systems
Operations Architecture
Application
Network
Equipment Sensor Programme Apps Data
Cloud
Interface
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So, while all current IoT implementations focus Industrial IoT versus
on the data delivery architecture, a robust consumer IoT: Several
operations architecture is also needed in order
magnitudes of difference
to maximise customer engagement (see Figure 2).
Our experience suggests that many companies
have yet to think these implications through. In the mainstream media, the
Commendably, theyve responded to the rise of explosive growth of the IoT is most
the IIoT by getting their appliances online and
often discussed mainly in terms of
connecting them to their central manufacturing
database and core systems. But in focusing on the consumer devices and products.
shiny new IT aspects, theyve often overlooked the But if you consider the scale of the
need for new operational capabilities demanded industrial products sector and its
by the new communication return path from
potential for device connectivity
thecustomer.
throughout the supply chain and
This challenge underlines the double-edged with customers, then its set to
nature of IIoT connectivity. True, it opens up
dwarf the size of the consumer
opportunities to expand customer revenues
by selling value-added services like remote IoT by several magnitudes. While
monitoring, maintenance, and other value-add a few billion consumer devices
services such as insurance. All of these offerings wearables, home automation
are made more viableand potentially more
devices, carswill become IoT-
profitableby the granular, real-time device
data made available thanks to IIoT sensors and connected during the next five
connectivity. But failing to invest simultaneously years, the equivalent global growth
in operational and customer care capabilities will curve for the industrial IoT is set to
drastically undermine these benefits.
rocket towards 100 billion devices as
the technology becomes pervasive in
industrial sectors worldwide.
However, to realise the full opportunities presented One is that manufacturing and industrial products
by the IIoT, more is required than just hiring businesses are among the organisations that
a roomful of service reps. To truly leverage its will be impacted most directly and deeply by
new direct customer relationship and make the the widespread disruption springing from IIoT.
full transition to an IIoT-enabled, customer- Not only do their products, markets and processes
centric and service-orientated organisation, have a high propensity for IIoT-driven change,
a manufacturing business must fundamentally but also these companies have among the largest
transform its strategy and organisational culture. numbers of devices and appliances that will need
to be adapted for IIoT connectivity. In this context,
So while the operational challenges are its interesting to compare the projected size of
significant, its important for companies to the Industrial IoT with that of the Consumer IoT
grasp the fact that those challenges can only a point examined in the accompanying information
be discussed and understood in the context of panel on the previous page.
a holistic and strategic review of the companys
business models, new forms of customer A second reason for the scope of change required
engagement, and other related issues. In other by the IIoT lies in manufacturing and industrial
words, the operational challenges result from companies legacy plants and processes. In many
the transformation that will become evident cases these have remained little altered for decades.
once a holistic and strategic review isdone. But theyre now set to change dramatically, as
IIoT connectivity drives rapid convergence
Furthermore, to achieve the required degree between operational technology (OT)robots,
of customer centricity, the organisation will conveyor belts, smart metres, generators, substation
need to move away from a historical focus on equipment, transformers and the likeand
engineering and products, and towards a mindset information technology (IT) such as back-office
that puts customers front and centre. A culture systems and software.
change as profound as this is a major undertaking
for any business. Its especially challenging for a
manufacturing company with a deeply-embedded
engineering culture. However, its a transformation
thats becoming increasingly imperative, for
severalreasons.
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An Operations Checklist for seizing the IIoT opportunity
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The pace of growth is underlined by research from
Gartner, who predicts that spending on new IoT
hardware will exceed $2.5 million a minute in
2016and that, by 2021, one million IoT devices
will be purchased and installed every single hour.1
Finally, ongoing advances around big data are Together, the pace of growth in the IIoT and the
also helping to drive progress in IIoT deployments radical nature of the disruption it triggers mean
and opening up opportunities for disruptive new manufacturing businesses must come to grips
business models. The result can be to reverse the quickly with its implicationsor face being on
polarities of whole industries, creating entirely the wrong end of shifts that could put their future
new ways of procuring, provisioning and consuming at risk. In recent decades, technology-enabled
goods and services of all types. For example, an disruptions have turned sectors ranging from
aircraft engine manufacturer can now embed media to transport to accommodation upside down.
intelligent IIoT-connected sensors into its turbines, The software sector is a good example: in the past
thus generating data that enables airlines to lease fifteen years or so its moved from an industry based
the engines by the minute or hour rather than mainly on selling licensed packages via resellers,
buying them outrighteffectively meaning theyre to one that sells its offerings direct to users on an
paying for propulsion-as-a-service on a per OPEX-based, software-as-a-service (SaaS) model.
usagebasis.
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demanding a new
operational blueprint
As IIoT connectivity and virtuality become pervasive, consumers of their products, the resulting new
manufacturing and industrial products companies consumer expectations and opportunities will
will face a similarly deep and broad transformation require changes in every aspect of their business
of their operating and business models. While customer relationships, product design, supply
many companies have gained some understanding chain, profit & loss, service models, and more.
of this transformation, what most do not yet realise
is the high speed at which they will need to navigate As a result, steering the right course to IIoT
through the resulting disruption. The timeframe enablement will demand a new operational
available to industrial and manufacturing companies blueprint: one that not only establishes and
is far more accelerated than that already faced by maintains a real-time two-way connection to
software vendors in previous years. customer devices, but also effectively manages
and leverages the opportunities resulting from
With the advent of the IIoT, whats clear is that the the increased customer engagement that this
days of stamping out widgets, shipping them out connection entails.
the door and forgetting about them are gone forever.
As manufacturers realise their long-time dream of
achieving closer interaction with the ultimate
To date, manufacturing and industrial products The message for your organisation is clear.
companies have been doing a great job of You need to be holistic and strategic when it
connecting their devices to the IIoT. This is a vital comes to fully leveraging the opportunities
stepbut actually represents the beginning of the offered by the IIoT. And that means you need
transformation journey not the end of it. to take steps to focus on the operational impacts
of IIoT connectivity to turn the resulting disruption
To complete the IIoT transformation journey, it into huge opportunities to build value and
is important to conduct a holistic and strategic competitive advantage. Conversely, if you hold
review that enables the organisation to tackle back from taking action, the IIoT opportunity has
the operational and customer engagement aspects, the potential to become a major disruption of your
while also preparing the business for disruptive business bringing major threatspossibly putting
industry change that will go beyond anything weve its continued existence in doubt. Fortunately, the
seen in our lifetimes, and will demand a deep and choice is not a difficult one to make.
broad transformation of the enterprise.
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Contacts
Raman Chitkara
Global Technology Industry
Leader +1 (408) 817-3726
raman.chitkara@pwc.com
Rob Mesirow
Principal
+1 (202) 730-4408
rob.mesirow@pwc.com
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