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Smart, Connected Products Need Digital Transformation To Succeed

Closing the gaps that exist between customers’ changing needs for configure-to-order products and manufacturers’ ability to deliver them is where the Industrial Internet of Things’ (IIoT) greatest opportunities for growth are today. Manufacturers are transitioning from product-driven revenue to services and software, and making this strategy work they need to design and deliver smart, connected products

IIoT Platforms Are Enabling The Future Of Smart, Connected Products

The era of smart, connected products has arrived. Manufacturers predict 47% of all their products will be smart, connected and capable of generating product-as-a-service revenue by 2020. Capgemini estimates the size of the connected products market globally will range between $519B to $685B by 2020. Capgemini’s conservative estimate based on survey data and market analysis is that smart, connected products will add $518.9B or 6.63% to manufacturing value-added to the GNP of surveyed countries. In an optimistic scenario, where manufacturers accelerate their smart, connected product efforts, their combined efforts could potentially add up to $685.6B to manufacturing value added in 2020. Manufacturer’s investments in Industrial Internet of Things (IIoT) systems and technologies is predicted to reach $500B by 2020, with the value IIoT creates ranging as high as $15T of global GDP by 2030 according to Accenture.

IIoT platforms enable and accelerate smart, connected product development and manufacturing by breaking down silos that slow progress. They’re also enabling diverse front-office systems including CRM and Configure-Price-Quote (CPQ) to integrate with and share real-time data with ERP, PLM and CAD systems. Each of these systems runs at their clock speed or cadence, and each is vital to successful product configuration strategy being achieved. Engineering needs PLM & CAD systems to develop new smart, connected products and manufacturing need ERP to manage all operations from the shop floor to the top floor. IIoT platforms are making it possible to take a true Configuration Lifecycle Management (CLM) approach to smart, connected products. IIoT platforms are purpose-built for manufacturing as the graphic below illustrates.

McKinsey & Company recently interviewed industrial equipment and machinery manufacturers regarding their current and future IIoT platform plans. When asked what the most important factors are in selecting an IIoT platform, senior manufacturing executives listed the following:

  • Standardized integration opportunities for existing systems including ERP, MES, PLM, and CRM. Integrating engineering, manufacturing and sales systems together is the highest priority manufacturing execs have when it comes to making a decision on which IIoT platform to select. Realizing each of these systems have their unique cadence or clock speed yet must all be synchronized with each other to deliver configurable, high quality smart, connected products, the manufacturing execs interviewed are thinking of how to excel at a CLM strategy in the early stages of IIoT platform evaluation.
  • IIoT platform providers do not approach their customers and take a vendor-neutral approach. IIoT platforms are capable of scaling across legacy manufacturing enterprise applications, multi-cloud networks, and large-scale new systems. Their agility at integrating with diverse systems is seen as a threat by many manufacturing execs, making a vendor-neutral approach essential in selecting one to partner with.
  • IIoT platform provider uses open standards. Capgemini found that the most successful smart, connected products manufacturers take an open architecture and API approach to create their IIoT platforms. It’s essential to do this for any IIoT platform to flex in response to changes in customer demand, supply chain conditions, and daily manufacturing efficiency.

What’s Driving the Urgency of Smart, Connected Products?

IIoT sensors and systems enable a continuous real-time stream of data from products back to manufacturers, creating new services and software revenue. Machinery manufacturers are seeing intensifying price competition that is eroding margins on their most configurable, profitable products. The pressure is on to reinvent themselves into services and software companies or risk seeing their products become commoditized. The following graphic from McKinsey explains the market dynamics driving the urgency manufacturers have to reinvent themselves.

Sources

 

Cross-Cutting Business Models for IoT, European Commission, 2017. (304 pp., PDF, no opt-in)

IoT 2020: Smart and secure IoT platform, IEC, 2018 (181 pp., PDF, no opt-in)

IoT Platform Comparison: How the 450 providers stack up, IoT Analytics, by Zaña Diaz Williams. July 13, 2017.

IOT PLATFORMS The central backbone for the Internet of Things, IoT Analytics, 2016 (24 PP., pdf, opt-in)

Leading the IoT, Gartner, 2017 (29 pp., PDF, no opt-in)

Leveraging Industrial Software Stack Advancement For Digital Transformation, McKinsey Digital. August 2018 (50 pp., PDF, no opt-in)