We discussed in our previous post where the value of IoT comes from. Let’s now break the value creation down into 4 categories:

IoT can help a company

• Operate products better
• Maintain products better
• Make products better
• Make new products better

We will address each below.

Maintain Products Better

One of the easiest ways to get value from IoT is around the maintenance and support of products. If a company improves its maintenance of a product they are then able to get a longer life out of the piece of equipment and can prevent unplanned downtime.

Let’s say the two leading causes of the breakdown of a machine are lack of lubrication in some parts, and overuse which causes overheating. Typically, reactive or preventative maintenance is performed. Companies will react and maintain the product when they hear, see, or otherwise experience an issue with the equipment. Or they may perform maintenance on the product every so many hours of usage, or every month or so. Reactive maintenance is usually too late and those issues including unplanned downtime could have been prevented. Additionally, preventative maintenance could be performed too frequently. Each of these maintenance methods can be costly.

If we were to add some sensors to the machine, if they didn’t already exist, and then pull the data from the machine, we could remotely monitor the machine’s operation. Better yet, we could add adding some predictive analytics to the solution. This then alleviates the need for the human to watch the data, and we can set up alerts to indicate that the machine will need maintenance at some point soon before a breakdown, and add automatically generate a work order in the CMMS (i.e., work order management system) with appropriate data about the data. We can then schedule the machine for some planned downtime during a slow shift.

Once an issue is discovered or predicted, the maintenance staff will have data to understand the issue. They can send a technician with the appropriate level of skills and with the correct parts to be sent to fix the issue on the first try. Additionally, they are maintaining and fixing the equipment only when needed.

All of this results in reducing overall costs to support the equipment.

Operate Products Better

Costs for operating equipment can be reduced with IoT by providing better data and then acting on that data. This data can then be used to improve the operating uptime of the equipment and operate the equipment autonomously.

Uptime is improved by having data that allows a user to operate the equipment within engineering limits, which maximizes its use in production. This is possible only when data from the product is provided to the user and other staff.

Costs can be further reduced by running the equipment autonomously. Data from the equipment as well as other data from the manufacturing process can be computerized to perform repetitive tasks and workflows. This allows people to perform higher-value tasks, and monitor the production of more equipment at the same time.

Make Products Better

It is possible to get value from IoT by making products better, i.e., innovating on your existing products. The idea here is to obtain and understand data about the product, the environment in which it’s used, how it’s used, and the customer’s business. Once you have that data you can understand how the product is used and improve how the customer uses it through better training, or more data for the customer to consume. It would also be possible to improve the product itself by eliminating bugs in the equipment or incrementally improving features in the product.

Imagine a piece of equipment you currently manufacture and sell to a customer. Once they have it installed and are using it, do you really know how they’re using it? You may occasionally send someone from your service department –or from an outsourced service company— to maintain the equipment. However, that is only a snapshot of performance and the product may not even be in use at the time, because it’s down for repairs by the service department.

Wouldn’t it be valuable to receive a continuous feed of data about how the product is used? Is it possible you may find they use the product in a way you never expected, for a function it wasn’t designed? Or maybe you find they are frequently pushing the machine beyond its limits? Or it’s possible you can get data that would tell you they aren’t performing maintenance like they’re supposed to.

A quick example…let’s say we make a piece of equipment that uses a lot of oil for lubrication, and the equipment requires oil filters to keep the oil clean. Maybe the client isn’t changing the filters as we prescribed, which causes parts to wear faster and potentially leads to more frequent and very expensive downtime. We might not know this is the cause when we visit the equipment to fix issues.

The product engineers could collaborate with the service, marketing, and sales departments to come up with ideas on how to get customers to change the oil filter. They could start with providing the client with warnings by email or automated phone calls or an alert on their screen to change the oil, or even send a message to their CMMS (work order system) to generate a work order for them. It may even be possible to move the oil filter to a location that makes it much easier to get to, making it easier to change the filter.

These potential changes in the product enabled by IoT can make the product more interesting and valuable to prospective customers and more competitive in the market. That, of course, can then increase sales of the product to existing markets and potential new markets, which increases the company’s revenue.

Make New Products Better

Let’s take the idea of making products better and extend that even further, i.e. invention. If you had the data available to you, enabled by IoT, for how your customers are using the products and if you analyzed the data and product’s use, it’s possible you could add whole new features or come up with a completely new product for the existing or a new market. This is taking the process of improving products to a new level.

This drives even greater opportunities for increasing sales and thereby increasing revenue from the new products.

Let’s use the same example above with the equipment that uses oil for lubrication and requires oil filter changes. If we’re gathering data about the use of the product — including attributes about the oil or quality or level of lubrication — we might be able to determine they’re not changing the filters.

In the same way, the product engineers, service, marketing, and sales teams could collaborate to develop new features. Depending on the product and how valuable the improvement is, maybe the product engineers could come up with a way to make the machine change the filter on its own, alleviating the need for human intervention. It might even be conceivable they could develop a new tool which makes changing the oil easier, or possibly a new service. This tool or service could then be expanded to other pieces of equipment with a similar issue which might start a new line of business…all of which expands the revenue enabled by IoT.

Conclusion

All four of these methods are very interesting ways that adding IoT capabilities to products can create value for a company.

If we took a step back and looked at all four of these ways of creating value from IoT, we can see that the first two, operating and maintaining products better, save money. These two methods help improve equipment utilization and optimize the efficient use of the equipment. Therefore, they lower costs or reduce expenses, and thereby can increase profit. However, the effect they have on profit is limited. You can usually squeeze a few extra percentage points of expense reduction and maybe a little more revenue from these two methods.

The more interesting point is that the other two methods of creating value –making products better and making new products better — will drive more revenue. Driving more revenue will have a greater impact on profit than reducing expenses.

All four of these methods are very interesting ways that adding IoT capabilities to products can create value for a company.

If we took a step back and looked at all four of these ways of creating value from IoT, we can see that the first two, operating and maintaining products better, save money. These two methods help improve equipment utilization and optimize the efficient use of the equipment. Therefore, they lower costs or reduce expenses, and thereby can increase profit. However, the effect they have on profit is limited. You can usually squeeze a few extra percentage points of expense reduction and maybe a little more revenue from these two methods.

The more interesting point is that the other two methods of creating value –making products better and making new products better — will drive more revenue. Driving more revenue will have a greater impact on profit than reducing expenses.

All four of these methods are very interesting ways that adding IoT capabilities to products can create value for a company.

If we took a step back and looked at all four of these ways of creating value from IoT, we can see that the first two, operating and maintaining products better, save money. These two methods help improve equipment utilization and optimize the efficient use of the equipment. Therefore, they lower costs or reduce expenses, and thereby can increase profit. However, the effect they have on profit is limited. You can usually squeeze a few extra percentage points of expense reduction and maybe a little more revenue from these two methods.

The more interesting point is that the other two methods of creating value –making products better and making new products better — will drive more revenue. Driving more revenue will have a greater impact on profit than reducing expenses.