There's a pony in here somewhere!
There's a pony in here somewhere!

Getting Real with the Internet of Things

Summary: Most manufacturing companies face challenges when contemplating Digital Products and the IoT, because they are not making Highly Valuable Things or Mass-Market Things, but Specialty Things – niche products with very targeted appeal. And “Information as a Product/Service” will be a radical departure.

The hype around the Internet of Things (IoT) is amazing – yet there are still plenty of folks that have not heard of this term. Most will show a flash of recognition when I talk about fitness trackers, or smart locomotives and other images from Cisco and GE ads. But for a large number of manufacturing firms, the IoT is still far away; possibly some dabbling in the Engineering group, but nothing concrete.

The challenge is that ideas like “smart devices” and a “connected world” are getting attention for really big, sexy implementations – Highly Valuable Things (six- and seven-figures, cost and price) like tractors and locomotives, or Mass Market Things that target either [a] millions of consumers with price (low) and volume (high), or [b] high-end, status-based consumers based on exclusivity and look/feel.

So where does that leave specialty manufacturers? We make Things – actually, we make a lot of Things. And based on the current level of buzzword hype, we are destined to teach these Things to collect data and send it home for analysis (now that they have something to tell me) or join in a local conversation with other Things (now that they have something to talk about). It also seems apparent that we are destined to do this – or else it will be done to us, via the promise / threat of Disruption.

PonySomewhereBut reality for most manufacturing companies has major challenges, because we are not making Highly Valuable Things or Mass-Market Things, but Specialty Things – industrial products with lower volumes, or niche products with very targeted appeal. And, for most manufacturing organizations, “Information as a Product/Service” will be a radical departure …

  • Product Development – We are aware of the opportunities, but detailed questions remain around metering, data transmission, data storage, and creating end products (data, analytics, services). It is still relatively early – component cost and supply can vary, and standards are still being set. And while many engineering groups are clever enough to meter products in the field, few have the same depth of experience in data transmission, storage, security, and analytics.
  • Operations – We have been spending years buying raw materials (physical “stuff”) and converting it to parts, devices, and systems – and driving out cost while improving quality and service. Development, sourcing, manufacturing, and distribution of data (metaphysical “stuff”) involves a fundamentally different way of thinking and doing; this will be an interesting organizational challenge.
  • Product Management – The great promise, of course, is to create organic revenue growth that is scalable, sustainable, and delivers the appropriate (high) margins. The challenge for Sales & Marketing will be to divert some of their attention to products and services that are unlike most of what they have sold in the past. Yes, there are parallels with Aftermarket and Maintenance / Service, but analytics or data subscriptions may be sold to a different functional area within the customers’ organization.

So the Opportunity is known, and the Challenges are there – how can manufacturing companies make this Internet of Things stuff a reality? Great question – and one that I am highly energized to answer. For my company, our updated IT strategy will have development and implementation of information-based products and services as a major component. To help introduce these ideas, we have developed a framework to characterize the challenges and split up the problems into smaller chunks, and we’ve used this framework in preliminary conversations with a few of our business units. Now it’s time to take these ideas on the road – as we start to socialize the new strategy with folks at multiple levels, we will engage with Engineering, Operations, and Product Line management to understand how the entire company needs to change and adapt to develop these new products and services.

I expect these conversations to range broadly; we’ll talk some about the technology elements, but we also want to cover how to identify, build, and validate market opportunities & business models, how to “network” to connect and leverage ideas from multiple BUs and technology vendors, and how to get incremental financial investment out of “corporate”.

Next Steps

This is all great timing for the IT organization; we’re starting strategic plan reviews, and will be listening for potential “hooks” to existing products & services, while tapping BU leaders & Product Line manager with ideas and energy in this direction. We will also start publishing some of the ideas, frameworks, and stories that are already in development.

It will be an interesting ride – and I will be writing about it a lot on this blog. Stay tuned.

# 8 September, 2014

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James MacLennan

... is the Managing Partner at Maker Turtle LLC, a digital consultancy focused on creating value in ways that align with your strategy and drive engagement with employees, customers, and stakeholders. He is an active creator, providing thought leadership through on-line & print publications, and public speaking / keynotes.