By 2020, connected and intelligent products are predicted to be the biggest “user group” of the internet, estimated at 24 billion devices. But this is not just a revolution in consumer technology. In the industrial world, connecting smart devices has the potential to transform how factories operate, buildings are managed, and vehicles are maintained and operated - in fact an almost limitless number of new industrial processes, functions and services.
As industrial devices become more intelligent and connected, they are producing huge amounts of data that can be collected and used to generate new business ideas and drive a new digital value chain. What will be key is the response by businesses to create new business models and capabilities required to support the change that this connectivity is bringing.
Take Michelin as an example. Connectivity and smart devices enabled the tyre manufacturer to completely shift its business based not on selling tyres, but providing the mobility and safety of tyres as a service. With sensors and intelligence embedded in the tyres, their performance is monitored with a network of support available to ensure that problems can be addressed.
Elsewhere a drilling manufacturer is selling the ability to create ‘holes’, not drills, while automated building maintenance is evolving from selling the devices that control a building’s environment to business models that focus on energy saving as a service and charge accordingly. Mining equipment manufacturers have switched from selling excavation equipment to monetizing the volume of materials extracted. All these are only possible because of the advanced, connected, intelligent devices that can produce performance data that provides a whole new basis for sellable and billable services instead of products.
This switch from a focus on products to new models based on service is by no means straightforward. A significant change in approach is required, with implications that run across the whole enterprise, from manufacturing and service through to back office functions. Reconfiguring the business to new models demands a new approach. This is a radical shift away from focusing on the tangible product, to marketing an intangible service delivery concept.
It requires businesses to develop new ways of thinking about what they are delivering, how to charge for it and how to support their customers across the end-to-end service lifecycle. A product no longer simply leaves the factory gates and is forgotten. In this new services model, the handover to the end-customer is just the start of the process.
This all means that industrial businesses need to acquire the ability to reengineer new processes. Offering a successful new business model or service depends on being able to decompose a process into its constituent elements and understand how to redefine it as a service. Also, data management and analytics are essential to address the huge amounts of data that connected devices will drive into the business. Creating embedded software for products in the development process is essential to drive their connectivity and intelligence. This requires both software and engineering know-how - mechanical and electronic - in order to understand how the product works, then develop the software accordingly.
Creating an automation layer is equally fundamental for the creation of new service models. These can be for manufacturing, building automation system, telematics in a truck, or in any one of thousands of potential applications. But every domain requires understanding of its specific demands, and that, in turn, requires deep expertise of both the technology and the business change required.
So, while Digital Industry 4.0 is often viewed as a technology and technical challenge, the conversations that will drive value from it are about how business models will change. More companies will market and sell products as a service as we move to a world where connected, intelligent products provide the information for new types of services, where data is harnessed to offer as-a-service products - all supported by a fully digital value chain. Developing the capabilities to support them will be the priority.
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