The rate of change spurred by technological innovation is reshaping markets and competitive landscapes on a seemingly daily basis. Global leaders of industry of the early 2000s are being dwarfed in market capitalization by technologically native companies. Additionally, global macroeconomic forces are amounting in frequency and severity constantly jeopardizing business continuity.
Fortunately, technology provides a means to sway these disruptive threats and delivers a path to a hyper-growth and profitable future for traditional enterprises.
This is the double edge sword of disruption – an ongoing battle organizations face between disruptive threats and leveraging opportunities to counter them. Many industrial companies are countering these disruptive foes with the Industrial Internet of Things (IIoT) as the centerpiece of their digital transformation strategy.
We’ll dive into the relevant disruptions facing manufacturers, how leveraging IoT provides a solution to these disruptions -- and even presents an opportunity to disrupt markets.
The list of global events and forces facing manufacturers is seemingly endless and continuous. Trade wars, chip shortages, and COVID-19, among many others, frequently challenge the resiliency of supply chains. Unexpected events can result in significant downtime and layoffs for production facilities, creating massive sunken costs. Even without outside forces, manufacturers are operating in a cost-intensive ecosystem where they are constantly challenged by stakeholders to operate more efficiently.
Unsurprisingly, cutting costs is the most frequently cited goal for manufacturers' digital projects, according to PTC’s State of Digital Transformation. These range from improving the efficiencies of critical assets, reducing manufacturing and operating costs, or the costs of goods sold, which can account for upwards of 50% of annual revenue for industrial companies.
The Industrial Internet of Things proliferates in these industrial and production environments through Smart Connected Operations (SCO) and illustrates well how digital technologies connect physical processes. IIoT connects into disparate yet critical industrial equipment underpinning much of these costs and unlocks the lucrative insights for performance and health data within them. Core IIoT platform capabilities for monitoring and managing performance across lines are key to improving cost-centric operational metrics like overall equipment effectiveness (OEE) or downtime.
Bharat Forge, a metal forming manufacturer, set an ambitious production goal of ‘zero unplanned downtime’ for its facilities. The manufacturer recognized IIoT as the only way to identify common culprits of downtime through real-time visibility and analysis of historical performance trends. Bharat alleviating costly downtime via IIoT improved OEE by 15% in many of their forging lines.
SCO can also help manufacturers create or maintain market differentiating products. For example, Carlisle Construction Materials’ (CCM) production lines are larger than a football field and generate two billion board feet of insulation a year. Ensuring quality of products across this complex manufacturing process requires real-time and in-context information to act on. CCM turned to IoT to connect, analyze, and democratize the disparate data across its industrial environment and equip its engineers, operators, and maintenance staff with critical insights to maintain the highest levels of quality.
While many global events are unforeseeable, manufacturers should turn to IIoT to lessen their impacts by becoming as efficient and resilient as possible.
The market commonly considers digital disruptors as software startups leveraging cutting edge technologies like cloud computing and artificial intelligence (AI). However, this mantra also applies to nascent digitally native manufacturers who are capitalizing on emerging technologies to offer differentiating products and services. These typically younger manufacturers are less boggled down by industrial processes and organizational barriers and able to react quicker to market conditions.
For example, the impact of COVID-19 immediately pushed the world to at-home exercise equipment and machinery like Peloton, creating correlating shifts in demand and alterations to business strategy.
Large-scale manufacturers can leverage their production scale to create next-generation products and sizeable customer bases to fuel service revenues. Smart Connected Products are the increasingly chosen path to do so for product and service differentiation; 86% of manufacturers say SCPs are critical to support their long-term success and profitability. Some of the top cited external drivers for SCPs in the same survey are the need for differentiation and direct request from customers.
IIoT is being increasingly embedded into new products as well as retrofitted onto existing ones in customer operations. Real-time IIoT insights enables customer visibility into the manufacturer’s products they are using to prevent downtime. IIoT is also creating significant service efficiencies through remote monitoring/service, limiting unnecessary dispatches to deployed products and improving operational metrics like truck roll. Operating as an actionable intuitive industrial data engine, IIoT platforms are increasingly linked with other critical service information including parts/consumables, workers, warranties, service history, engineering models and others. IIoT also provides a closed feedback loop to engineering teams with actual product usage and performance data to leverage for future iterations.
A provider of industrial rental equipment, Sunbelt Rentals used IIoT to rethink their deployed product fleet of 600,000 assets across customer operations. A major bottleneck to operational efficiencies resides with optimizing the workflows of its over 4,000 service technicians. With real-time and contextualized IIoT-driven health data, they could locate more precisely their widely dispersed assets and repair them with more granular service information.
IIoT provides a foundation to further leverage service as a profit center and source of reoccurring revenue through the emerging business model Product-as-a-Service. This is where manufacturers offer usage-based subscriptions instead of traditional product unit sales. Over 60% of manufacturers cite adopting performance/outcomes-based billing business models as part of their strategy.
Sysmex, a blood analyzer and manufacturer of other medical devices, aligned with this business model shift by enabling ‘payments by the test’. IIoT drastically improved service efficiencies, enabled compliance, and patient satisfaction, as well as multiplied Sysmex’s total addressable market to other healthcare facilities.
IIoT is increasingly providing not just a path to survive in the era of disruption but increasingly thrive. Acknowledge that both ends (threats and opportunities) of the double edge sword of disruption being sharpened or dulled dictate your current and future standing in the market.
IIoT-led disruption, proliferated by smart connected operations and products, provides a waterstone for manufacturers to cut through competitive landscapes today and tomorrow.
Read the ABI Research & PTC whitepaper that goes in-depth on three technologies leading the way in the age of disruption.