This post has been republished via RSS; it originally appeared at: Microsoft Azure Blog.
This article is the second in a four-part series designed to help companies maximize their ROI on the Internet of Things (IoT). In the first post, we discussed how IoT can transform businesses. In this post, we share insights into how to create a successful strategy that yields desired ROI.
The Internet of Things (IoT) holds real promise for fueling business growth and operational efficiency. However, many companies experience challenges applying IoT to their businesses.
In an earlier post, we discussed why and how to get started with IoT, recommending that companies shift their mindset, develop a business case, secure ongoing executive sponsorship and budget, and seize the early-mover advantage. In this post, we’ll cover the six elements of crafting an IoT strategy that will yield ongoing ROI.
1. Have a vision of where you’re headed
IoT leaders benefit from having a vision for where they’re headed and how to commercialize IoT, whether it’s improving the customer experience, redesigning products, expanding a service business, or driving operational excellence. As with any business vision, making it a reality is a long game. IoT leaders and teams will gain insights slowly over a series of projects that stairstep to more significant gains.
“The advice I would give any organization is first and foremost, understand the problem. Fall in love with the problem, not the solution,” says Shane O’Neill, enterprise infrastructure architect and IoT lead for Rolls-Royce, in the Unlocking ROI white paper. Rolls-Royce has used IoT to transform their services business.
That’s sound advice because digital transformation isn’t easy. According to McKinsey, the first 15 or so IoT use cases typically provide modest payback but enable companies to develop the expertise they need to expand IoT’s footprint in their business. For IoT leaders, that can mean cost savings and new revenue gains of 15 percent or more.
2. Define what ROI means to you
It can be difficult to calculate the ROI for IoT projects because there are so many variables, and business processes that don’t exist in isolation. However, doing so will enable cross-functional IoT teams to win and keep executive sponsorship and demonstrate progress over time.
Here are some of the types of value companies are realizing on their IoT investments—gains that could be part of your ROI rationale. They include:
- Avoiding unnecessary production costs by minimizing operational downtime and extending the usable lifespan of machinery.
- Reducing production costs by capitalizing on automated processes, remote monitoring, proactive repair and replacement, and fewer break-fix incidents.
- Protecting assets by securing costly, and multi-million-dollar equipment from diversion and theft.
- Enabling smarter decision-making with data analytics that include edge insights, process automation, artificial intelligence (AI), and machine learning.
- Optimizing energy use by identifying sources of waste and prioritizing sustainability initiatives.
- Revolutionizing product and service development through access to test-and-learn processes, highly accurate customer analytics, brand-new digital-physical products, and subscription-based services.
- Enabling customizations of products at the point of sale or later in the service lifecycle after customers have gained some experience with them.
- Getting a competitive advantage, with the ability to execute rapidly based on real-time insights and connected services.
3. Get everyone on the same team
Ideally, IoT is an enterprise-wide collaborative effort that involves senior decision-makers, IT, operations technology, and lines of business. IT and operations can collaborate closely to determine how IoT devices and systems will be connected to each other, digital platforms and networks, and partners. They also need to decide how they will be monitored, managed, and secured.
Getting everyone aligned around the path forward helps companies avoid the temptation of connecting devices and running projects in isolation. Although new IoT platforms empower the business and IT alike to pilot projects, executing a series of independent efforts could invite technology chaos into the organization. Connected devices and IoT systems introduce a myriad of new endpoints that need to be managed appropriately and at scale to avoid creating cyber gaps and introducing the opportunity for data breaches.
Similarly, IoT leaders can communicate a plan for when and how they will serve the different lines of business and win their patience and cooperation. For lines of business, the wait could be years, not months, for an IoT project. Help business executives understand the strategic reasons, corporate priorities, better execution, and efficient scaling, among them.
4. Align strategy to real needs
When starting with IoT, it’s tempting to set a big and audacious goal. Yet, the reality is that companies will probably have more success if they start with something small and quantifiable and quickly solvable, and then build on it.
Take for example, a commercial fleet or logistics company that needs to improve its ability to locate its vehicles. By using IoT and GPS, workers can stage vehicles for maximal usability, stop wasting time searching for cars, and optimize the throughput of the fleet.
Over time, this same company could measure more of its data (vehicle speeds, starts and stops, turns, time to load and unload, and fuel use) to test new processes and institutionalize them. Employees could plan truck routes to maximize right turns, saving time and fuel use, service vehicles proactively to avoid flat tires, oil loss, and other issues, sequence arrivals to speed loading and unloading, and more. This is how the savings from IoT data, analytics, and reporting add up to big gains.
5. Collect only the data you need
Because of IoT’s ability to optimize processes, it’s tempting to connect everything and pan for gold in the torrents of data that result. However, the reality is that businesses analyze only a fraction of the data they possess.
Companies new to IoT as well as those that lack a data management practice often take time to analyze the data they really need—and whether they currently have access to it. If they do, the next step is to focus on data collection. Do you have access to the right information, or do you need strategy to collect something new? And be specific. Too much data can create unnecessary noise, making it difficult to understand and isolate what actually improved processes or why it didn’t.
Conversely, if companies don’t possess that data, they may need to commit to a phase zero data collection effort, connecting devices and waiting an appropriate period of time to create the historical trend and real-time data they will need to truly understand their processes.
6. Consider starting with services to prove the value of IoT
Today, IoT initiatives fall into two buckets. The first is to improve operational efficiency. But the more powerful and emerging trend is evolving to become a managed service provider. That’s because IoT data provides value that the business and customers can see, aligning partners around making improvements. In fact, optimizing services is the number one strategic IoT priority for companies today, according to McKinsey.
Rolls-Royce manufactures engines for commercial aircrafts, some 13,000 of which are in service around the world. Rolls-Royce has forged deeper connections with its customers and delivered real value by using IoT to help service their customer engines. The company uses the Microsoft Azure IoT platform and Azure AI to collect terabytes of data from large aircraft fleets, analyze them for operational anomalies, and plan relevant actions. Rolls-Royce’s services help airlines trim fuel consumption, service parts or replace them when needed, and minimize unplanned downtime that could cost millions of dollars across fleets.
“The Microsoft Azure platform makes it a lot easier for us to deliver on our vision without getting stuck on the individual IT components. We can focus on our end solution and delivering real value to customers rather than on managing the infrastructure,” says Richard Beesley, Senior Enterprise Architect of Data Services for Rolls-Royce.
Using IoT to increase efficiency
Although IoT can have almost limitless applicability to the business, its greatest value is helping companies use data to grow and operate with ruthless efficiency.
Consider this tale of two companies: Both have exceptional products that offer comparable new business capabilities. However, the first company has a reactive business model, with limited interactions with customers after the product buy. It’s still relying on a customer-initiated, break-fix service model.
The second company uses IoT to move further into its customers’ businesses, offering insights into how its products can be used for maximal value, automating manual processes, scheduling servicing proactively, and providing insight into other processes that can be fine-tuned for new business gains.
It’s easy to see which company is best positioned to cross-sell and upsell new products from its position as trusted partner. It’s easy to see which company will seize shares from its competitors and triumph in the digital economy. That’s why now is the time to lead—not lag—with IoT.
Need help? Read this white paper on how to maximize the ROI of IoT.