In 2018, the IoT market within the manufacturing industry stood at a humble $27B. However, that number is expected to grow to $137B in the next five years. Accelerated by the pandemic, IoT implementation had and is continuing to see tremendous growth over the past several years in many other industries as well, including mobility/transportation (15%), energy (14%), retail (12%), healthcare (9%) and supply chain (7%). With this growth in mind, CEOs finally have an opportunity to leverage IoT to maximize value within their organization and drive significant returns on their investment.
While most CEOs recognize the need for taking an active role in their company’s digital transformation, the mountain of responsibilities on their plate has often meant taking a back seat to IoT program planning. Their lack of input implementation, coupled with the overly complex first-generation IoT platforms, often led to organizational confusion on overarching IoT strategies with no clear value proposition for its use. With IoT finally positioned to play a significant role in the strategic direction of organizations, it’s time for chief executives to capitalize on the IoT opportunity in front of them.
While IT and technology teams traditionally handle the execution of IoT implementations, building an effective IoT strategy can be challenging and involve an array of business obstacles posing barriers to bottom-line benefits. In today’s Internet-connected world, understanding the ‘what’ and ‘why’ of IoT is critical. But it is equally important to recognize how IoT solutions can bring new value to the entire organization, its employees, and even its customers.
Major business questions need to be asked when launching IoT projects. What justifies the investment in the IoT program? What KPIs need to be hit to call an IoT program successful? Are we capable of running and maintaining the IoT solution after we develop it? If it’s customer-facing in a B2B context, can we justify it to our customers? CEOs need to take a leadership role in posing these questions and formulating the answers to them to drive success. Here are three specific focus areas where CEOs should take the lead on IoT programs.
Strategizing IoT Goals and KPIs
Understandably, a lot of planning time ahead of IoT implementation is spent discussing what wireless protocol will be used, the type of gateway to utilize, and how many sensors are needed. While these are essential conversations, it’s vital to ensure IoT programs don’t get embedded in the weeds too early. Solely focusing on technological issues can obscure bigger business goals and objectives. IoT can not only catalyze digital transformation; it can turn value creation beliefs within organizations upside down — uncovering new ways to increase, improve and accelerate value for customers.
However, to unlock this true potential, clear business goals and KPIs need to be set in advance for IoT programs and continually reassessed based on ongoing performance. These goals and success metrics will often be very specific to industries and often need to be personalized based on individual businesses. For instance, IoT success in the industrial market tends to be reasonably straightforward to gauge. The value of decreasing product or manufacturing downtime easily justifies IoT investments.
In the commercial market, success can be harder to define. The margins are often thinner on implementation, and budgets can be used for many competing departments. Furthermore, without a clear overarching strategy, the path to implementation can be a winding road. As such, IoT KPIs for commercial enterprises must include clear monetizable outcomes.
Fortunately, a growing number of chief executives are now looking at IoT as a needed investment. Juniper Research forecasts Industrial IoT connections to grow 107% by 2025, bringing the global IIoT industry to an estimated $216B. The key now is maximizing the return on that investment. One additional key to that return is ‘data’. If we’ve learned anything from the past year, it’s that capturing information can be a critical component to swiftly pivoting in unpredictable circumstances.
The data provided by IoT programs means there is always the latest data at your fingertips. Knowing you have the latest and most accurate data means as a CEO, you can make correct decisions faster. Forward-thinking executives understand that problem solving through data and analytics is crucial in managing today’s organizations. And many of the issues that IoT-enabled data can solve before they even happen are worth the investment alone.
Harnessing IoTs Impact on Availability as Its Best Ability
In sports, a popular saying is “availability is the best ability”. The same is often true with IoT implementations. Forget the pomp and circumstance that surrounds new technologies for IoT, such as AI. The essential ability for any IoT program is the 24-7 availability of IoT resources.
To ensure IoT availability, CEOs not only need to be thinking about the underlying technology stacks on sensors and SaaS dashboards, but they also need to be poking holes in the security of the solution with their technical teams. With IoT increasingly in the crosshairs of cyberattackers, best-in-class cybersecurity needs to be a core requirement. Furthermore, to limit the impact on IT performance and the potential for hackers moving laterally into mission-critical areas, reliance, and integration with existing IT networks should be minimized.
In addition to the underlying reliability of IoT solutions, many IoT program’s most significant benefit can be keeping the lights on mission-critical assets. During the pandemic, reliability has become even more important. Maintaining operations has become mission number one, and the decisions made to prevent downtime often need to be completed remotely.
Preventing downtime with IoT-enabled remote asset management predictive maintenance strategies also enables companies to lower maintenance costs in a current period where bottom lines are increasingly under the microscope. McKinsey’s past research indicates that remote technologies and assistance can decrease field maintenance costs by 10-40%.
Without the ability to send maintenance workers into facilities as often or with the same number of employees pre-pandemic, remote asset management has been used to maintain business continuity. Simply putting sensors on the most important assets can open up a direct feed for maintenance teams into asset health. Employees can access this data via the cloud from the safety of their own home while assessing real-time data on insights such as vibration, temperature, and pressure to avoid potential failures.
Leveraging IoT to Transition Organizations into Industry 4.0
Although COVID-19 dominated boardroom discussions in 2020, digital transformation themes to adapt to the ‘new normal’ were also on the agenda. IoT is often leading those transformations, and therefore it shouldn’t be a surprise that the term ‘IoT’ was mentioned in over 20% of earning calls in Q4 2020!
But even though CEOs and C-Suite executives alike realize the value of working seamlessly in a digital space and welcoming the fourth industrial revolution with open arms, the actual adoption of IoT-led Industry 4.0 has been slow. With this in mind, it is not enough for CEOs to broadly champion the promise of IoT and industry 4.0. To truly capture the value of IoT and successfully transition into Industry 4.0, CEOs must leverage their unique knowledge of their company so they can adequately delegate roles and allocate resources to get there.
Not only will transitioning into Industry 4.0 have a major impact on corporate strategy, but it will also affect revenue, value chains and essentially alter the way an enterprise operates. CEO’s can’t be the only ones leading the effort. With the full weight of transitioning into Industry 4.0 should not fall squarely on the CEO’s shoulders. Instead, CEOs must assemble a team that works holistically to achieve the KPIs they set for becoming an industry 4.0 organization.
Any digital transformation requires a CEO’s deep understanding of their organization and their knowledge about the trends, challenges, and risks that impact their respective industry. And with failure to digitally transform being cited as a top reason why Fortune 500 companies fail, it’s becoming increasingly clear that CEOs can’t afford to take a back seat to IoT. It now can drive bottom-line business benefits and long-term organizational improvements, and CEOs should be leading the IoT initiatives.