Advancements in the Industry 4.0 space have led to a rapid transformation in the industrial sector. Machines are now becoming more connected and intelligent. Operations are getting further augmented using advanced analytics and AI/AR. The lines between physical and digital are being blurred by this confluence of disruptive and emerging technologies in the industrial world. The industry is being disrupted and in the process creating profound opportunities through new horizons for productivity and efficiency gains, disintermediating value chains, product transformation and closer connections between manufacturer and consumer.

IIoT is enabling industrial companies to collate previously unavailable data from a host of industrial products (like turbines, pumps, motors, and compressors etc.). When businesses unlock new insights and information from siloed contextual data, and apply advanced analytics and AI/AR technologies they are able to achieve higher efficiencies in core business operations and processes, like improved manufacturing techniques, proactive repairs and maintenance, higher production speeds and supply chain efficiency.

Unlocking New Revenue Potential through Smart Connected Products

The most disruptive aspect, other than operational improvements, takes place when industrial product companies unlock new revenue potential through the incorporation of IIoT-enabled business into core services and products. Highly engineered industrial product manufacturers are already starting product transformation steps to obtain smart connected products. This is being achieved through sensor and actuator embedding into products, connection to the cloud for storage and analyzing and acting on sensor-generated data. Manufacturers are able to leverage smart connected products in unlocking new revenue sources by taking new offerings to markets and delivering new value propositions like:

a) Monetizing Product Intelligence and Insights: When manufacturers augment information gathered from a customer’s smart connected product using external datasets, manufacturers are able to generate broad-reaching insights using data analytics and deliver point-of-use information. This, in turn helps their customers make informed business decisions and ultimately drive business outcomes. Such services could be monetized as insight-as-a-service and priced on a subscription basis.

b) Monetizing Product Differentiation and Innovation: Feedback loops between product engineering and customers using smart connected products are helping manufacturers incorporate insights into ongoing development and innovation. This helps manufacturers differentiate their products by integrating ideas from a better understanding of their customers and the context in which they use the products. Consequently this will drive up a potentially higher price for the products.

c) Monetizing Field Service Innovation: Looking past traditional product warranty and maintenance, manufacturers are able to leverage product usage data towards new service package designing with service level agreements and higher value product performance. Manufacturers can also combine field information using product configuration data to provide preventive maintenance details in advance of potential failures or faults. Such services can be explicitly monetized by manufacturers, usually pricing such services as a subscription driving a recurring revenue base.

Accelerating Revenue Realization through IIOT-led Business Model Transformation

Transitionally successfully from an equipment manufacturer to a business generating revenue form of IIoT-enabled smart connected services and products, industrial product companies could make fundamental transformations in operations like:

a) The shift towards Software & Service driven Model: Software and related capabilities adoption is an integral component of an end-to-end IIOT-led market offering and solution. Software is critical to analyze and respond to data emerging from sensor-enabled equipment. Industrial companies need to build new operational skills in the areas unique to software. These include:

1. Customer onboarding capabilities to implement and activate software-led solutions & services

2. Support of the services on an ongoing basis

3. Sales processes oriented towards selling a bundled (hardware + software + services) offering

4. Product release management geared toward high-frequency software releases

b) Adoption of Subscription based Business Model: Traditional Industrial product businesses traditionally build around a business model where investments are made in support of lengthy product design and engineering cycles. The sales model is usually designed around a one-time sale of the product and associated services at the beginning of each customer relationship. By contrast, industrial companies need new methods of monetizing IIoT-led services, based on a subscription business model, characterized by significantly accelerated product engineering cycles with frequent product updates and releases, and sales model designed in equal parts around the upfront sale as well as continuous contract renewal at the end of each subscription term. Each of these business model characteristics drives an economic structure fundamentally different from that of product-based businesses.

c) Focus on Customer Experience and Outcomes: Higher customer adoption of IIoT-led services and solutions is fuelled by ongoing customer engagement and meaningful delivery of customer experiences and business results. This leads to a greater share of consumer sales. This requires a much more consultative, end-to-end and collaborative approach with customers.

When it comes to industrial product manufacturers, the real question is not ‘if’ but when the launch of IIoT- enabled smart connected products are poised to take off. The majority of industry leaders are taking the plunge in building business models around IIoT-enabled Smart Connected Products. Example: GE with GE Digital acquiring ServiceMax, Siemers and the Mendix acquisition, Johnson Controls and Smart Connected Chillers, UTC with Digital Accelerator (UTxD), John Deere with FarmSight precision agriculture services Rolls Royce’s IIoT-enabled jet engines. Those at the start the IIoT-led transformational curve is best positioned to capitalize on this opportunity.