Digital Leaders Blog

internet of things (5)

Industry 4.0: Infographic

Connected devices are set to transform manufacturing, from demand forecasting to inventory management. While the vast majority of firms recognise the opportunity, many remain behind the curve in terms of adoption. 

The Infographic below summarise the current state of play. 

Click the image to view in full-size.

View source article here.

 Jim H

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A recent report from McKinsey provides a good summary and overview of the emerging Internet of Things, especially in a B2B context.

Those attending the forthcoming MBA Digital Leadership modules (including the online version) and the Digital Leaders Bootcamp to be held in June may find McKinsey’s ‘Executive Guide to the Internet of Things’ to be useful in terms of background reading.

A brief bullet point summary is provided below:

  • The Internet of Things (IOT), physical assets equipped with sensors, provides information systems with the ability to capture, communicate, and process data. This, in turn, creates game-changing opportunities in areas such as production efficiency, distribution, and innovation. The rate of adoption of such technologies is increasing rapidly.
  • While most media attention has focused on consumer applications (fitness bands, connected household appliances etc), the potential for B2B use is much greater. Opportunities arise in three main areas - expanding pools of value in global B2B markets; new levers of operational excellence; possibilities for innovative business models.
  • Expanding pools of value: McKinsey estimates that within the next ten years, IoT will generate as much as $11.1 trillion a year globally in economic value across a diverse range of industries and physical settings including healthcare, homes, retail, vehicles and transport, cities, factories and work sites. B2B applications will account for nearly 70 percent of this value.
  • Optimising operations: Investment in IoT hardware - such as sensors embedded in manufacturing equipment and products electronically tagged along the supply chain - is only the starting point of the value equation. The biggest competitive gains will come when IoT generated data begins to inform decisions. Most of the new business value created will arise from optimising operations with examples including:
    • Sensors in factories making processes more efficient by providing a constant flow of data to optimise workflows and staffing.
    • Sensor data that will predict when equipment is wearing down or needs repair, reducing maintenance costs by as much as 40 percent and unplanned downtime by half.
    • Major improvements in inventory management where systems automatically reorder parts.
    • Taking the guesswork out of product development. IoT systems can gather data about how products function and how they are used. Using data from equipment rather than information from customer focus groups or surveys, manufacturers can modify designs so that new models perform better and are more customer centred.
  • Creating innovative business models: The IoT will change competitive dynamics across a range of different industries leading to new innovative business models being developed. For example, IoT data and connectivity may transform the sale of industrial machinery and other goods into a service. This is already happening with jet-engine manufacturers where the business model has changed to the provision of ancillary services not just physical equipment. Transportation as a service, enabled by apps and geolocation devices, is encroaching on traditional vehicle sales and distribution channels.
  • As with all major technological shifts, leveraging the potential of IoT will require significant management attention not just to new technical imperatives but also to a range of organisational issues. To maximise the opportunities, executives will need to overcome three main challenges:
    • Organisational misalignment.
    • Technological interoperability and analytics hurdles.
    • Heightened cybersecurity risks.

The report concludes that IoT will soon become a key differentiating factor in global competition. To allow companies to capture the full range of potential benefits, executives need to take a systems approach to addressing IoT organisational challenges and risks.

You can access the full report here.

As always, comment and feedback are very welcome.

Jim H

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If you’re not turning your company into a “math house” you’re headed for serious trouble. Every industry will soon be driven by digitization and every winning company will be using algorithms, or mathematical rules for processing information, to shape the end-to-end customer experience. Any advantages you have now will pale in comparison with a great set of algorithms that differentiates the customer experience. It is the algorithms that will create value for the business.

This is not guesswork. Sensors, the cloud, mobile and broadband wireless, and other such technologies are increasing the flow of digitized information exponentially. Algorithms, run on ever faster computers, can do amazing things with that information, from detecting patterns and making predictions to solving complex problems. They can even modify themselves as new information comes to light. 

More such catalysts are entering the fray every day. Venture capitalists have their radar out for and provide ample resources for the catalysts to scale up very quickly. The result is the reconstitution or destruction of industries, creation of new market spaces, and reshaping of old industry ecosystems.

Some leaders will ignore the trend, as happened at Nokia, or remain on the defensive, as reflected in Walmart’s delayed response to Amazon. But others know it is not going away and that they have no choice but to transform the company. That realization creates more anxiety than insight into what to do. CEOs are on the hunt to understand who has done what, and who has succeeded. They want to know, does a legacy company really have a chance of transforming itself into a math house? Can it do so at the speed of a start-up? Yes. On both counts.

The above quotation is taken from a recent article in the Harvard Business Review by Ram Charan entitled How To Transform a Traditional Giant Into a Digital One. The article examines the leadership lessons to be learned from the digital transformation of GE, the only surviving member of the original Dow Jones Index of 1896, showing that it is indeed possible to transform a large, traditional business despite the many obstacles and barriers to be overcome. 

There are important lessons to be learned here.

Jim H

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The Internet of Living Things

A recent article on the O'Reilly Radar site, by Hagen Finley, examined the new opportunities being created for wellness management by The Internet of Living Things

Using two illustrative examples of aero-engines and tyres, the article begins by presenting a concise summary of the Internet of Things and its potential impact on core business models. According to the author, real-time reporting from embedded sensors not only changes the way machines function, it changes the way they are sold and operated.

For example, aero-engine manufactures such as GE and Rolls Royce are now renting rather than selling engines to carriers, supported by a full-service contract. Sensors embedded in the engines provide consumption-based billing information and allow GE to perform just-in-time maintenance on field-replaceable engine parts. The carrier’s maintenance model is dramatically more effective and efficient than the previous non-sensored model, which either pulled engines out of service based on mileage or based on part failure, both of which translated to waste for the carriers.

Michelin is starting to follow a similar business model, selling sensor-enhanced tyres on a ton-kilometer revenue contribution basis where payment is proportional to the work done by the tyre over a defined time period. The embedded tire sensors allow Michelin to offer large-fleet trucking companies a new service that monitors and manages fuel consumption.

You can read how this type of business model could apply to the Internet of Living Things for our bodies by reading the full article here.

Makes sense to me........... 

As usual, all comments and feedback are very welcome.

Jim H

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According to Cisco's 10th annual Visual Networking Index, the number of people connected to the Internet will increase by one billion over the next five years, from 2.8 billion in 2014 to 3.9 billion by 2019, with much of the growth coming from emerging nations.

There will be an additional 10 billion new things connected to the Internet, from 14.2bn to 24.4bn connected devices, including smartphones, tablets, watches and sensors. Almost half of these connected devices will be things in our homes with other fast growing areas being wearables that improve our health and well-being, and cars that talk to each other and to us. This will herald a radical shift in how we connect to each other and the world around us especially with faster broadband speeds, increasing from from 20.3 Mps to 42.5 Mps.

According to Cisco, the massive uptake in broadband and new devices will lead to unprecedented digital and social upheaval. It is critical that business leaders and policymakers prepare now to meet the challenge presented by this new digital class.

The full report can be found here.

A useful summary can be found here.

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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