With advancements in the Industry 4.0 space, the Industrial sector is rapidly transforming. Machines are becoming more connected and intelligent while operations are getting augmented by AI/AR and advanced analytics. This confluence of emerging disruptive technologies is blurring the lines between physical and digital in the world of Industrials, and is disrupting the industry in fundamental ways. It is creating profound opportunities by – disintermediating value chains, opening new horizons for efficiency and productivity gains, transforming products into services, and bringing consumers closer to manufacturers.

Already, IIoT is enabling industrial companies to gather mountains of previously unavailable data from multitudes of industrial products such as pumps, motors, turbines, compressors, equipment, etc. Businesses can achieve greater efficiency by unlocking new insights and information from the siloed contextual data generated from connected equipment and applying advanced analytics and AI/AR technologies. Data insights can help businesses improve manufacturing techniques and production speed, optimize equipment performance, conduct proactive maintenance and repair, and achieve inventory and supply chain efficiency, etc.

Unlocking New Revenue Potential through Smart Connected Products

Beyond leveraging IIoT for operational improvements, the most disruptive aspect of this transformation occurs when industrial product manufacturers open new revenue potential by incorporating IIoT-enabled business models into their core products and services. Manufacturers of highly engineered industrial products have already started to transform their products into smart connected products. They are embedding sensors and actuators into their products while connecting them to the cloud to store, analyze and act on the sensor-generated data. They can, now, leverage these smart connected products to unlock new revenue sources, by taking new offerings to market and delivering a spectrum of value propositions for their customers, such as:

1. Monetizing Field Service Innovation: Beyond traditional product warranty and maintenance, manufacturers can leverage product usage data to design new service packages with higher value product performance guarantees and service level agreements. Also, manufacturers can combine field information from smart connected products with product configuration data to provide preventive maintenance information about any potential faults or failures. Manufacturers can explicitly monetize such services, often pricing these services as a subscription, which drives a recurring revenue base.

2. Monetizing Product Insights and Intelligence: By augmenting information gathered from customers’ smart connected products with external data sets, manufacturers can generate broad-reaching insights using data analytics and deliver point-of-use information. This, in turn, can help their customers make more informed business decisions and ultimately drive business outcomes. These services can be monetized as insight-as-a-service and related services offerings, priced on a subscription basis.

3. Monetizing Product Differentiation and Innovation: Smart connected products allow manufacturers to establish a feedback loop between customers and product engineering by collecting data on the actual usage of their products and incorporating it with ongoing product development and innovation. This can enable manufacturers to differentiate their products by getting a better understanding of their customers and the context in which they use the products and, consequently, drive a potentially higher price for the products.

Accelerating Revenue Realization through IIoT-led Business Model Transformation

Successfully transitioning from manufacturing equipment to generating revenue from IIoT-enabled smart connected products and services, industrial product companies will be required to make a fundamental transformation in their business and operations in ways such as:

1. The shift towards software and service driven model: Adoption of software and related capabilities is an integral part of an end-to-end IIoT-led market offering and solution. Software is essential to ingest, analyze, and respond to data emerging from sensor-enabled equipment. Beyond core software engineering and design capabilities needed in R&D, industrial companies need to build new operational skills in the areas unique to software. These include:

  • Sales processes oriented towards selling a bundled (hardware + software + services) offering
  • Product release management geared toward high-frequency software releases
  • Customer onboarding capabilities to implement and activate software-led solutions and services
  • Support of the services on an ongoing basis

2. Adoption of subscription-based business model: Industrial product businesses have traditionally been built around a business model wherein investments are often made in support of lengthy product design and engineering cycles. The sales model is typically designed around a one-time sale of the product and associated services at the start of the customer relationship. Today, industrial companies require new ways to monetize IIoT-led services, which are based on a subscription business model. These are characterized by significantly accelerated product engineering cycles with frequent product updates and releases. The sales model is designed in equal parts around the upfront sale as well as ongoing contract renewal at the end of the subscription term. All of these business model characteristics drive an economic model that is fundamentally different from that of the product-based business and industrial companies are required to adjust the resource allocation and investment decision model.

3. Focus on Customer Experience and Outcomes: Engaging with the customers on an ongoing basis and delivering meaningful customer experiences and business outcomes throughout the product’s lifecycle are critical for industrial companies. They need to do these in order to drive higher customer adoption of their IIoT-led solutions and services, and consequently a greater share of the customer wallet. This requires a much more consultative and collaborative approach with customers; an approach that requires an end-to-end transformation of the customer experience.

For industrial products manufacturers, it is not a question of ‘if,’ but ‘when’ IIoT-enabled smart connected products take off. Multiple industrial leaders have already taken the plunge into building IIoT-enabled smart connected products business models. Some examples include, GE with GE Digital and acquisition of ServiceMax, UTC with Digital Accelerator (UTxD) and the recent acquisition of Predikto, Siemens with the acquisition of Mendix, Johnson Controls with Smart Connected Chillers, Otis with OtisONE offering, John Deere with FarmSight precision agriculture services, and Rolls Royce with IIoT-enabled jet engines. Those that begin this IIoT-led transformational journey early will be well positioned to capitalize on the opportunity.


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