Like it or not, the Internet of Things (IoT) will change your organization unlike anything before. It will change your organization more than business process reengineering (BPR), Six Sigma, lean manufacturing, agile computing, or any of the other business concepts that periodically pop up, experience success, and are forgotten when the next big thing arrives. Granted, to date most of IoT deployments have been incremental and evolutionary, streamlining an existing process here, cutting some costs or improving productivity there. That, however, is about to change as IoT ramps up, as standards are adopted, and as security is bolstered — all of which and more are in the works. So please don’t misunderstand me. The Internet of Things certainly will be a big thing — an enormously big thing, actually. But it isn’t just the next big thing. IoT is the future — your industry’s future, your organization’s future, and probably your personal future. Welcome to the future. It’s spelled I-o-T. All this may seem like hype now, but it will prove in the end to be quite understated; IoT is very, very real.
You still are skeptical. The hype around IoT certainly has become deafening and distracting. Over the past few years, however, I have traveled more than a million miles meeting with people around the world to discuss IoT. Some of those people have actually done stunning things with IoT and wanted to show these off for me. Others were struggling with a problem IoT should be able to solve and wanted to know how their peers were doing it. Full disclosure: not every business problem, it turns out, lends itself to an IoT solution.
OK, so are there problems I wouldn’t recommend an IoT solution for? Not many come to mind immediately. If you insist, for starters there is the connected home. At the Consumer Electronics Show in Las Vegas you can see home appliances from washing machines to coffee makers connected to the Internet and to each other. The problem: while I see value in connecting individual home devices to the Internet, the business case for connecting all appliances and devices to each other in the mainstream home is just not there yet. There are a few emerging use cases, for example, home security and elder care where specialized devices in the home have to be interconnected, but an immediate IoT payoff is still some distance away.
In truth, most of the current implementations of IoT are in the business-to-business (B2B) area and are focused on improved efficiency and productivity around existing processes. As I said, IoT gains are incremental at this point. The real payoff from IoT comes down to automating existing processes that have a large labor or time component and streamlining the related process in one way or another. The resulting improvements, despite having measureable business impact, are mostly evolutionary. Similarly, you, too, should focus first on streamlining and improving your existing processes, which will deliver your fast paybacks and set you on the path toward more revolutionary applications, new business models, and incremental revenue streams. For example, you might use IoT to automate a data collection process you now do manually or remotely monitor something that otherwise requires a person to actually visit. Such solutions are already well proven and documented. I do, however, expect that down the road many breakthroughs in IoT will also come from the B2B2C (business to business to consumer) domain, but today they are just starting to emerge, pioneered by early adopters: processes like mass customization, food safety, and even autonomic car or drone transportation/delivery.
In the meantime, manufacturing around the world, including in North America, is having a renaissance of sorts, and IoT is part of the reason. By converging previously siloed sensors, machines, cells, and zones, IoT-driven factory automation helps enterprises integrate production and business systems and then bring everything online over a single network. Organizations are gaining flexibility to quickly adapt to changes, whether for new product introductions, planned product line changeovers, or other adjustments. Each affected zone, from the enterprise to the plant floor to the loading dock, receives real-time alerts about changes through networked mobile devices, video monitors, and human-machine interfaces. The real-time information also links back to the entire supply chain, so each step in the manufacturing value chain, from supply through production to distribution, can respond as quickly as needed.
These represent evolutionary improvements that together deliver real business value. Similar gains are being achieved in transportation, utilities, agriculture, building automation, education, retail, health care, sports, and entertainment — even the military. Companies in these industries are taking first steps on their IoT journeys starting with low-hanging fruit. Still, the process improvements are real and the paybacks, the ROI, add up to serious money in the bank, as I will demonstrate in Chapters 3 and 4.
So this isn’t theory. It’s real, and it’s working today. What a better example than a legendary American motorcycle manufacturer, Harley-Davidson Motor Company. The company was facing intense global competition while its core market was aging and new younger buyers wanted a different type of motorcycle. It needed to get agile, to be able to respond to changes fast, and to be more efficient and productive. IoT gave Harley-Davidson the capabilities it needed. Here’s how.
Harley-Davidson faced the familiar litany of problems encountered by many American businesses, especially large and market-leading companies or those with ambitions to be so in their industry. Labor was too costly. Production was not aligned with IT operations. Islands of incompatible data were everywhere. “You name it, we suffered from it,” one former Harley manager told me.
So the company pulled together key people from both IT and operations (known as operational technology, or OT). In every industry and most businesses, IT and OT are notoriously uncooperative, almost as if IT, as the book title says, was from Venus and OT from Mars. We’re not talking about a mass revolution here: more like a couple of people from different groups who got together by themselves and started actually talking to each other. Later they pulled in a few others and sat together in a room until they formed a unified team willing to communicate with each other and with other Harley-Davidson business units to gain the efficiencies IoT could deliver. The company converged its multiple networks into a single network and began consolidating data islands. As of this writing, one Harley-Davidson factory is fully IoT-enabled. The results are impressive. “What used to take a painfully long time to triage and troubleshoot now can be accomplished in a single morning,” the manager said, an order of magnitude improvement. That alone led to increased productivity, efficiency, flexibility, and agility. The results have been so astonishing that other Harley-Davidson factories are clamoring to be the next adopters of IoT.
Moreover, those are just the operational results. Harley-Davidson’s strategic business outcomes from the IoT-induced changes are equally impressive:
- Eighty percent faster decision making due to workforce enablement
- Dramatic reductions in costs and set-up time
- Continuous asset management, enabling even better decision making
- 6.8 percent increase in production throughput due to asset tagging
- Ten to 25 times improvement in build-to-order (BTO) cycle times (18 months reduced to two weeks)
- Seven to 12 percent increase in IoT automation-driven equipment utilization
All of this led to a profitability increase between 3 and 4 percent. And that was just one factory! Harley-Davidson bet its future survival on IoT and, from its first IoT-enabled factory, it began paying off big (see Figure 1.2). This same future attracts what I refer to as Generation IoT everywhere.
Maciej Kranz is Vice President of the Strategic Innovations Group at Cisco.
Excerpted from BUILDING THE INTERNET OF THINGS: Implement New Business Models, Disrupt Competitors, Transform Your Industry by Maciej Kranz.