The Business of IoT – Forget the Internet and the Things for a Minute (Part 1)

In this two-part series, I’ll explore the Business of IoT, a topic often obscured by the buzz of IoT and lure of new, related technologies.

IoT (Internet of Things) has been a viral buzzword for well over 5 years now, and many vendors, customers and service providers claim they’ve been connecting things for well over a decade.

Any search on the internet will yield a plethora of whitepapers, articles and blogs on the variety of products, services, technologies, vendors, and advances in IoT solutions. What you’re likely to find less of, however, are business-related discussions on problems being solved, outcomes being measured, transformations taking place, and new models being created.

IoT shouldn’t be an IT-centric topic

Perhaps the lack of attention on business is related to the IoT moniker itself, as the “Things” element tends to narrow discussions to endpoint-related items such as sensors, gateways, interfaces and connections. These are critical components that create a conversation between assets, products, vehicles, and people with the rest of our business environment. But IoT should not suffer the limitations of IT-centric discussions any more than other recent technology capabilities. For a long time, for example, the defacto mindset of “mobility solutions” was wireless networks plus smartphones versus the valuable streamlining of business processes, and the Unified communications marketers overloaded us with “ugly puzzles” –  a myriad of hyper-complex architecture slides stitching all the disparate pieces together.

Bottom line –  it’s always easy to get into a “technology for technology’s sake” conversation and lose sight that any such discussion ultimately should deliver on business impact.

Let’s Kickstart an IoT Business Discussion

The goal of this article is to help all of you out there keep business outcomes in the bullseye of your IoT game plan. Regardless of where you sit in the stakeholder realm – customer, consumer, vendor, supplier, system integrator, advisor or other – the output of this dialogue should benefit and stimulate collaborative sessions around specific business outcomes: revenues, costs and experiences.

A fundamental, consultative approach to yield value-based business discussions with clients is to entertain “before and after” scenarios that transform data into insights for better decision-making. Often, we’re simply talking about finding ways to facilitate the conversation between remote assets and the rest of the business. We’ll look at two cases –  one in transportation and one in infrastructure management.

Transportation

The rail industry is composed of many expensive assets – cars, rails and other equipment.  As in many industries, the cost of reactively servicing assets can be 3 to 5 times more expensive than proactively servicing before incidents. (This is because the cost of the actual fix is compounded by the impact on operations.) The optimum for any business is continuous operation, which can be accomplished if serviceable assets are moved in and out in planned interchanges of like-assets.  This fluidity can be accomplished through IoT:

• Before IoT: A set of cars is transporting valuable goods. Based on a historical “time-based” service schedule, the axle of car #3 is not due for replacement for another 4 months. Murphy’s law, which doesn’t care much about service schedules, kicks in and the axle cracks, halting the entire train. Immediately, a missed delivery time impacts the business. What’s the cost of missing an SLA? Add on the costs to roll out a field crew and required equipment, the time to get a replacement car, and the labor cost to move goods from one car to another, and this situation causes a pretty expensive hiccup to the business.
  • Questions for the COO: How many of these incidents can you afford? Even one? What is the target metric set by the business? How have you performed against this metric in the last 2 years?
• After IoT: With a series of sensors applied to the rail cars in key locations, a variety of metrics – from temperature to vibration – are measured in real time to assess the potential of such an axle break. More visually, IP cameras on the rail lines take high definition photos or video of axles as they pass, and those visuals are passed to a visual analytics engine to assess potential cracks. If a threshold is met, an alert is sent to operations with a predefined work order at the nearest facility for replacement of the axle. With a facility just 10 miles away, replacement is performed with a time out from the operation of 3 hours. While time to delivery is still impacted, the devastating effects of a broken axle are avoided.

Infrastructure Management

Protecting infrastructure is critical to any business, especially monitoring for fire, water, gas leaks and other mishaps that can negatively impact operations and finance – both in terms of cost and revenue. If a large office building suffers major water damage from a broken pipe, how much does it cost to fix the damage? If a factory suffers a major fire, how much revenue is lost because production lines do not function? In this space, there are opportunities for companies, infrastructure vendors, and insurance companies to better manage risk through proactive management. Let’s look at a pervasive example:

• Before IoT: The owner of a 50-story office building has implemented a complex set of systems to manage fire, safety, and other functions that ensure the protection of employees and visitors. Traditionally, compliance with local, state, and federal regulatory bodies is required, as well as periodic, annual inspections by auditors. But let’s say the company is super-proactive, scheduling quarterly inspections. Again, similar to the rail example above, this is still a time-based model.
  • Simple question for the CFO: What’s the cost to the business of a major infrastructure incident that happens between 90 day spans when inspections are scheduled? You’re paying for 2 extra inspections a year, and yet your time window for exposure is quite large.
• After IoT: Water, gas, electric components are connected with an IoT solution so the corporation can monitor its systems in real-time, and leverage photo and video snapshots when alarms are generated. The positive business impact to the corporation is many-fold to the CFO: mitigation of the risk of suspended operations, improved employee and visitor safety, and reduced insurance premiums because the business can more proactively manage liabilities. A small leak never gets the chance to become a broken pipe!

Common Themes Emerge

While these two scenarios have some industry-unique aspects, there are common themes:

1. These are business-outcome-first dialogues. These types of discussions lend themselves to conversations with the CEO, COO, SVP of Field Service and VP of Facilities among others. Solving these challenges can only happen if there is a clear definition of business goals, challenges, and performance metrics. At this level, the “what” of Things being connected and “how” they might get connected, is cursory. The primary question is “Why Connect any-Thing in your business?” Executive validation and prioritization is key.
2. Business outcomes can transcend across industries. Topics like continuity of operations, employee safety, managing costs, increasing revenues and corporate image are common to all industries. Identifying these priorities in conjunction with vertical-specific outcomes will yield a good checklist for validating business drivers.
3. IoT requires a strategic analysis of connected systems versus things connected in isolation. In the rail scenario, for example, the relationships between wheels, axles, cars and tracks can be causal. So connecting only the locomotive in order to track location and speed will yield a narrow set of benefits. If you also connect wheels and axles, this will spotlight the relationships between these assets. For example, wheels are to be replaced every 5 years, but in fact, 3 years of wear and tear leads to surpassing vibration thresholds, excessive stress in axles, and hence, a high rate of axle cracks. If you just connected axles, you would focus on “bad axles.”  So, think about causal relationships in your end-to-end asset chain, especially when there is a sequential job-nature to them.

IoT Can Drive Business Benefits – Are You Making it Happen?

These two examples show how IoT can drive business benefits through a solid understanding of a client’s business using a before and after analysis:  leveraging their goals, performance metrics, or pain points to be addressed. The value driver here was a direct consumption of new data transformed into new insights for better decision-making.

So, it’s clear there’s ample opportunity to move beyond cool technologies and IoT as a buzzword,  and map out business-outcome-oriented opportunities that drive revenues, cut costs, improve business image and improve customer experiences.  In the spirit of this article, I really want to get your feedback and learn about your experiences on the Business of IoT, regardless of whether you are a customer, vendor, integrator, consumer, or even an academic on IoT:

• How have you ensured a business-first conversation?
• How did you course correct out of “techie talk” without a true north business driver?
• Are you too focused on endpoint capabilities, or have you strategically assessed systems of related things (and people) to connect to drive maximum value?

Let the dialogue begin!

Next time, we’ll look at how IoT can offer new business models and connect things to other stakeholders including consumers and third parties.