Anyone who reads this blog knows the Internet of Things will have a revolutionary effect on business: heck, who would have thought we’d have a smart lawnmower?
However, when I read in Jim Heppelmann & Prof. Michael Porter’s second HBR article that: “For companies grappling with the transition (to the IoT), organizational issues are now center stage — and there is no playbook. We are just beginning the process of rewriting the organization chart that has been in place for decades.”
I had a sudden inspiration. What if the IoT could in fact have far more impact, actually sparking a significant revolution in corporate processes and even basic organizational structure?
It’s because the IoT lifts a barrier to efficient management that was so common in the past we just accepted it and designed work-arounds to cope: we simply didn’t know how products actually worked (or didn’t!) once they left the factory dock. Come to think of it, aside from the occasional pressure gauge, we actually didn’t know how manufacturing equipment was actually functioning either. Since so little data was available, it made sense for senior management to control it, creating departmental “information silos” and parceling out the data as it saw fit. The result was many layers of hierarchy and linear processes in which departments functioned in isolation, then passed things on to the next department, often with disastrous results.
Apocryphal or not, one story illustrated the problem. There was a new car back in the 70s with a spiffy design and selling well. Then a customer took his in for its first routine oil change. The mechanic slid under the car & slid right out: this simple procedure would require dropping the entire engine, a costly and time-consuming process. Why? they hadn’t bothered to include a field mechanic in the design process, and none of those who were involved, working in isolation, had noticed this obvious flaw.
The IoT will lift that veil of blindness. We can foresee a time in the near future, with real-time sensors fully-deployed, when everyone will be able to share (that’s important!) access to real-time data for the first time. Operating from this shared “ground truth,” they’ll be able to design integrated processes linking every department as never before. Hierarchy and linear processes will give way to a seamlessly-integrated circular organization revolving around a shared, real-time data hub.
Every function will be inter-related and will benefit:
- Marketing and sales will create new revenue streams and increase customer loyalty by marketing products, such as Rolls-Royce jet turbines, as services rather than selling them (which diminished contact with the customer). Instead, customers will pay only when the product is working, giving the company an incentive to make it more durable and dependable. Products will increasingly be upgraded remotely through software updates. A customer whose evolving needs are still cared for is less likely to look elsewhere for a new one.
- The maintenance department, which used to operate in isolation, will be fully integrated and become a strategic function. Real-time data from the products in the field will alert them when a problem is just in its earliest stages, triggering “predictive maintenance,” which is less costly and disruptive, because it can be scheduled at the customer’s convenience. Performing that maintenance is also more efficient, because mechanics can use Vuforia Augmented Reality models of the products to diagnose the problems remotely, making certain that they will have the needed parts with them rather than having to made an additional trip.
- Customers may play a crucial role in the final product configuration, by choosing among various operating options built into a device, such as Deere tractor engines, depending on their specific needs.
- Product design will change because designers will no longer have to guess what features need upgrading because they will receive a constant data flow from the field about actual performance, using "digital twins".
- Supply-chain and distribution networks will achieve unprecedented precision. Materials and parts restocking will be automatically triggered on a M2M basis with no human intervention when supplies reach pre-determined draw-down levels (and, by the way, this may also lead to “reshoring” of suppliers, because the ability of a nearby company to resupply precisely when you need it would outweigh price savings from oceans away). Distribution networks will similarly become more precise: imagine a time in the near future where real-time data from a vending machine will, on a M2M basis, reroute a delivery truck because of a sudden surge in demand at another location.
- Accountability will increase. If your function came early in a linear progression of steps, the precision impact of your work might not ever filter back to you. Now, with everyone sharing instant access to real-time operating data, you will be well aware of results.
- Creativity and integrated solutions will increase: this is harder to quantify, but we all know it’s true from personal experience. When people and departments with differing expertise, personal interests and needs are brought together to solve a problem and share the same “ground truth,” new solutions will emerge that wouldn’t if each worked in isolation.
There’s an added bonus to gradually restructuring our companies to operate in a cyclical, rather than linear or hierarchical fashion. There’s a growing realization in Europe, and to a lesser amount in the US, of the benefits of a “circular economy,” which emphasizes raw materials conservation, reuse and remanufacturing of products rather than a linear one in which products are eventually landfilled or incinerated. It not only reduces waste, but also improves operating efficiency, and circular companies within a circular economy will benefit even more.
The transition to circular companies will be difficult, because we must dismantle operating systems and unlearn management styles that have existed since the beginning of the industrial revolution. However, benefits from operating precision to better customer relations to increased creativity made possible by real-time sharing of data warrant investment in IoT processes today, then experimentation with new circular processes revolving around real-time IoT data!
W. David Stephenson, of Stephenson Strategies, is an IoT thought leader and consultant. His blog is ranked by Google as a leading non-corporate IoT blog. He will be speaking at LiveWorx 2017 about ThingWorx: Platform for Management Revolution. Register to attend LiveWorx 2017 today!