Using IIoT to Create Product-Service Hybrids
The manufacturing industry is radically changing as the boundary between the physical and digital world has blurred. Industry 4.0, a concept that promotes the computerization of manufacturing — and includes the Internet of Things (IoT) and the Internet of Services — is gaining momentum globally. In 2015, Industrial Internet of Things (IIoT) technologies, represented by IoT and Big Data analytics, is greatly impacting the business world by creating an environment for new service types and business models to emerge.
“Smart manufacturing” is a vision of the world in which open networks connect people, information, and machines. People and machines interact and transact at unprecedented scales, and Big Data analytics provide enterprises a way to respond to complex, changing situations in real time. In a 2015 report, General Electric (GE) and Accenture estimated that by 2030, up to US$ 15 trillion of global Gross Domestic Product (GDP) will come from the Industrial Internet. Another study shows that enterprise executives recognize the opportunities that IIoT will bring, and expect it to begin altering the competitive landscape throughout 2015. 89% of respondents believe that enterprises that fail to adopt a data analytics strategy this year — 2015 — will see their market shares shrink and their growth slowed. The conclusion is that the implementation of an IIoT strategy, and the deployment of a technical platform is critical to the bottom line and productivity of every enterprise.
Although China’s manufacturing leads the world in total output, the signs of slowing growth and rising labor costs are forcing an infrastructure upgrade following the latest IIoT developments for smart hardware and digitalized information systems. China is rethinking its business models and creating new goals for growing business and industry.
From Products to Product-Service Hybrids
By collecting and analyzing large amounts of machine and sensor data, IIoT helps enterprises to dramatically increase the efficiency of optimizing their assets and operations.
Over the past 10 years, the cost of fuel has risen an average of 19% per year. IIoT will allow, for instance, airlines — for whom fuel is their single greatest expense — to collect full flight data and to use performance analytics to combine flight, weather, navigation, risk, and fuel consumption data into a holistic, real-time analysis with the goal of reducing flight times and, with that, have a direct impact on bottom-line savings.
Improved operational efficiencies are only part of the benefits of IIoT. More importantly, IIoT contributes to revenue growth and the creation of new revenue streams by leveraging value from intelligent, networked product-service hybrids enabled to generate data for use in both physical products and digital services. Rather than focusing only on product manufacturing, enterprises are now able to provide brand new services to build new markets and diversify revenues.
A good example of this is the Michelin Group, a leading tire manufacturer based in Clermont-Ferrand, France. The company has launched EFFIFUEL™, a new IIoT-based service designed to help truck fleet managers reduce fuel consumption by up to 2.5 liters per 100 kilometers (0.66 gallons per 62 miles) driven. Trucks outfitted with engine- and wheel-mounted sensors collect data on fuel consumption, tire pressure, temperature, speed, and location that is transmitted to a cloud server where the data is analyzed by subject-matter experts who, in turn, offer detailed recommendations to fleet managers.
Deere & Company — the large agricultural equipment manufacturer based in Moline, Illinois — and its partners launched a precision farming solution that collects and analyzes data to optimize the selection of suitable farming land, and accuracy of seed and fertilizer dispersion.
Product-service hybrids increase the opportunity for enterprises to directly reach customers. If enterprises only sell products, their only interaction with customers may be maintenance and repair inquiries. However, when enterprises sell digital services in addition to physical goods, their communication with customers can only increase, and the data obtained from digital services helps enterprises gain operational insights that increase efficiency and enhance customer loyalty.
Tasks for Shifting to Product-Service Hybrids
Businesses that strive to lead their competitors by using digital technologies to create new revenue streams understand that inventing hybrid products and services is not an easy task.
Accenture is recommending that Chinese enterprises focus on the following tasks:
- Rethink value creation for customers with an open attitude. Hybrid product-service business models are not achieved overnight. Chinese enterprises must act swiftly and adopt new models to stay ahead of the competition, as they seek new co-operation with a variety of industry practitioners. Specifically, enterprises must rethink what types of services they provide that are most beneficial to customers in relation to their own bottom line and longevity. Enterprises must not merely optimize specific product details when shifting from products to product-service hybrids, but rather, focus on responding to unmet customer requirements and resolving key business problems with innovative solutions.
- Establish a future-proof partner ecosystem. Few enterprises have all the capabilities and technologies required to achieve product-service hybrids. As such, enterprises must seek partners across diverse industries to fulfill their shared goals. In their co-operation with partners and suppliers, enterprises must combine the advantages that each element brings to the value chain while using information networks to explore potential markets.
- Build an IIoT platform. Enterprises must invest in three types of capabilities: Smart devices and applications, sensor data processing, and industrial analytics. With these capabilities in place, enterprises can combine resources and data, in ways that could not be done in the past, to create an IIoT platform that integrates both IT and Operational Technology (OT). Although IIoT platforms are still early in their development, enterprise executives must prepare for the technological challenges that accompany a s tep-change in interoperability, information sharing, and co-operation with partners.
- Focus on talent acquisition and development. While phasing out some traditional skills and competencies, IIoT presents new demands and job requirements for the talent pool. Enterprises must develop a workforce with diverse skills, specifically in data science, software development, hardware engineering, testing, operations, marketing, and sales, and expand their reserves of highly skilled talent.
IIoT has the power to dramatically change the competitive landscape. Enterprises must harness this power to secure their respective competitive positions in the marketplace, by changing their mindsets and exploring new product-service hybrid business models that will help them break through new markets.