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s a management consultant, you’ll already be familiar with such buzzwords as the Internet of Things (IoT), Industrial Internet and Industry 4.0. But what staff resources do businesses need to implement an IoT solution? How do you deal with the client’s security fears? And, maybe more fundamentally, who in the organisation actually owns IoT? We’ll answer each of these in turn and hopefully leave you a lot more enlightened… Let’s start with who the client is by dividing the world into enterprises that build ‘Things’ and businesses that use them. So AGCO builds combine harvesters but August Farms uses them. GE builds MRI scanners but the Children’s Hospital of Orange County uses them. Goldwind builds wind turbines but Sempra uses them to generate electricity. And so on. To businesses that build Things, the benefit of the IoT is that a connected Thing will give a higher quality of service. A combine harvester must be ready to work round-the-clock during harvest time, so one that can self analyse to predict failure during its lengthy down time is an obvious win. A company that rents construction equipment globally can spend $1bn on maintenance so again, using data to improve maintenance has massive implications on operating costs. This is interesting to executives on the product or service side of the business. But CEOs of leading manufacturers are also beginning to understand that the internet has the potential to change their business models in order to allow for additional sources of revenue and product differentiation. These newer, web-enabled models follow

a path pioneered by the enterprise software companies. If you realise that increasingly, the value of the machines is in the software, then this should come as no surprise to you.

As-a-service model The internet has enabled the ‘as-aservice’ model for IT infrastructure and software. The IoT enables machines-asa-service or equipment-as-a-service business models for all kinds of products, potentially allowing many types of company to shift from selling products to selling services based on these products. This model can transform large capital

technology? There are at least four reasons: lower consumable costs, higher quality service, healthier products and safer services. Most machines require consumables to operate. Planes need fuel, gene sequencers need chemical reagents and so on. Anyone who’s ever run an inkjet printer knows that the machine rarely costs more than the toner used over its lifetime and generally, consumables are so integral that they form a large portion of any operational cost structure. It follow that any reduction in consumables can be a significant benefit.

“CEOs of leading manufacturers are beginning to understand that the internet has the potential to change their business models” expenditures into a pay-by-usage operating expense. Emerging examples of this trend include selling tyres by the number of miles driven, compressors by the amount of usage and industrial coal mining machines supplied based on the volume of coal mined. Selling such services will often be more profitable than selling the products they are based on. In your industry, while you may not want to take the risk of being the first to move into offering product-as-a-service, you certainly won’t want to be the last.

Reducing consumables Let’s move on to the enterprises that use Things: hospitals, farms, airlines, manufacturers and utilities. Why should they care about web-enabled precision

Let’s take Nick August, owner of August Farms, as an example. Precision farming can lower the cost of consumables such as fuel, fertiliser and pesticides and Nick estimates that with precision agricultural machines, he can reduce fuel consumption from 60 to 5.9 litres per hectare for crop establishment. That’s a huge saving to him but of course, he also uses fertilisers and pesticides and a reduced consumption of those not only reduces his costs, it also creates a healthier product that’s having less of an environmental impact.

Application So what technologies and skills does a business need in order to implement an IoT solution? Such applications can

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DISRUPTION Magazine - Autumn 2016  

Emerging technologies and innovative business models are transforming life, business and the global economy at a speed none of us have ever...

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