This blog was co-authored by Rodney Holmes and Kevin Olikara of Kalypso.
When thinking of reasons machine builders are introducing smart connected products (SCP) in the industrial space, it comes down to an opportunity to offer new service and business models to customers. In today’s ultra-competitive market, machine builders are constantly looking for new ways to stand out and differentiate their products.
So, what are the benefits of smart connected products for machine builders in the industrial and high-tech industries and what are the challenges many companies encounter when they try to introduce SCP solutions themselves?
Benefits of smart connected products
The goal of machine builders introducing smart connected products is to transform their service and business models. These new offerings support their customer outcomes of improved asset utilization and productivity, at a time when customers have less and less ability to do it themselves. Building these new connected offerings achieves three things:
- Additional differentiation in the market: Machine builders can increase margins with software-driven functionality and expand market share with high-value, outcome-driven connected services and offerings.
- Closer intimacy with customers: Being seen by customers as an SCP partner that’s focused on achieving specific business outcomes, as opposed to simply being a supplier of a machine, can positively impact recurring business.
- Contractual-type revenue: These new connected business models create revenue that’s more predictable and recurring compared to cyclical capital projects.
Common challenges of a DIY approach
Sometimes machine builders decide to go the do-it-yourself route when building a smart connected product solution. However, the DIY approach has often led to:
- Increased time to market: Organizations that attempt to build their own SCP solution on average take two to three times longer to implement. Current market trends have created an inflection point where now is the time to capture market share with connected offerings.
- Higher total cost of ownership: The cost of ownership for SCP solutions can be up to four times greater than if the company partners with a professional services firm to build their product. This is due to many factors, including significantly more development cycles or needing to restart a stalled project, training and talent acquisition, and a lack of scalable architecture that increases administrative and maintenance costs.
- Loss of competitive advantage: Machine builders commonly struggle with acquiring the right blend of skill sets in SCP strategy, IoT architecture, and data science and security to successfully develop and support new SCP offerings. Working with a connected solutions partner helps machine builders focus on their core competencies in the machine operation and manufacturing processes.
- Security issues: Not using leading practices often results in site-specific implementations stalling due to customers’ IT security concerns. Machine builders need to leverage a defense-in-depth approach for SCP solutions that includes security policies applied at the data, application, endpoint, network, and physical layers. Far too often, DIY offerings lack this level of robust security and can leave an organization exposed to malicious hacks, data breaches, and other security threats.
In many instances, machine builders start SCP initiatives without a clear strategy or sufficient digital expertise. A common result is a connected solution that doesn’t provide clear business value or is not scalable, leading to the project stalling or needing a restart.
Leveraging industry-leading best practices and architectures is critical to quickly going to market and scaling SCP-enabled offerings and services. Get started with Kalypso.