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Five key strategies for IoT success

Companies need to be agile because in some IoT systems, it will be a question of the winner taking it all, according to Kent Eriksson, IoT business consultant at PTC

There are five key strategies for success in projects using internet of things (IoT) technologies, according to Kent Eriksson, IoT business consultant at PTC.

“The first is to aim to start small, but scale fast,” he told attendees of PTC LiveWorx Europe 2015 in Stuttgart, Germany.

This starts by looking at what smart, connected products already exist in an environment and mixing those with better new technologies, while phasing out those that are becoming obsolete.

“Start where you are today and add value rather than starting a new isolated project or making changes for the sake of it,” said Eriksson.

At the same time, he said, companies should consider all opportunities available to them by identifying potential value and not be put off by new terms such as “IoT” or “smart, connected products”.

An example of starting small and scaling fast, said Eriksson, is John Deere, which started with a smart, connected tractor, but then quickly integrated that with tillage and harvesting equipment and external data sources such as good soil and fertiliser combinations or weather forecasting systems.

“Start with a smart, connected product the gives immediate return on investment by lowering cost and improving efficiency through IoT services, then build as many new added-value services as you can,” he said.

The common pattern, said Eriksson, is getting immediate value by monitoring a product so that it can be controlled, and then adding value by optimising performance and adding logic and analytics.

Where companies already have home-grown machine-to-machine (M2M) communications, he said they can add connectivity to existing products using a platform such as PTC’s ThingWork platform.

“This enables companies to connect to other products and systems that use different communication protocols as well as shorten time to market by building M2M and connectivity capabilties simultaneously,” said Eriksson.

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The second important principle in IoT projects, he said, is to focus on value. This is particularly applicable to companies that see themselves as IoT companies from the start.

An example of focusing on value, said Eriksson, is All Traffic Solutions, which started by providing portable radar speed limit signs that could be mounted to existing signposts.

“They had a very specific value proposition to get an entry into the market that appealed to traffic police and construction firms, and then every new product they introduced added value to the existing products as well as having value of its own,” he said.

For example, by adding to a sign that reflects the time to arrive at a particular destination a product that measure the number of vehicles passing a particular point, the company was able to add value to the original sign by proving information about traffic congestion.

“This has enabled the company to evolve from providing just speed limit signs to providing a set of traffic management and safety services, which means they no longer sell products, renting them out instead because their customers are more interested in the outcome of managing traffic and are willing to pay a premium for All Traffic Solutions to deploy and maintain the signs,” said Eriksson, noting that value-added data services typically have a higher margin than selling products.

The lesson to be learned, he said, is that All Traffic Solutions has found new opportunities along the way by focussing on value and building an extendable product architecture so that each new product strengthens the overall system.

“Do not try to remove all ambiguity up front because thing will change depending on competitors and the market, and do not get complacent because if you stop innovating someone else will step in and take the value,” said Eriksson.

Understanding macro trends

Key to understanding the value, he said, is to understand the macro trends in the market, to go after low-hanging fruit with quick-win strategies without getting bogged down with excessive analysis.

“Research has shown the key setting for IoT-enabled products and services are in factories, cities, health and retail, while quick wins are usually found by enabling a shift from reactive services to proactive services such as predictive maintenance, where suppliers contact customers ahead of failure to avoid downtime,” said Eriksson.

The third key principle for successful IoT-related projects, is to get customer inputs and move to an outcome-based ecosystem.

“As we have seen already, you can sell an outcome rather than a product, and this can be done with extremely complex products such as aircraft engines where the airlines pay only for the hours of flight, which enables them to calculate the cost of operating a flight much more easily because it removes the need to calculate the cost of maintaining the aircraft engines,” said Eriksson.

At the same time, the supplier gains the opportunity to earn more by providing an outcome-based service and has total control that enables the supplier to optimise its own ecosystem by optimising the quality and performance of the product.

Eriksson predicted that in future there will be more outcome-based ecosystems competing with each other. For this reason, he said it is important for suppliers to understand what are the most desirable outcomes by asking for input from customers and then partnering with the best to deliver those outcomes.

A building management firm, for example, could partner with academia to understand the best way of heating and cooling buildings, and with software developers to create IoT-enabled systems to deliver that outcome.

“It is important to get customer input and not continue business as usual without continually looking for new opportunities to deliver value,” said Eriksson.

Balancing risk and reward

The fourth key principle for success, he said, is to pay proper attention to safety and security to balance risk and reward.

According to Eriksson, it is not only important to meet and exceed customer expectations on safety and security, but it is also important to ensure security considerations are appropriate for the application and do not unnecessarily stand in the way of realising value.

“You need to define security that is fit for purpose, which means the approach for credit card data needs to be different to data from a humidity sensor,” he said.

Eriksson added that it is important not to ignore safety, security and regulatory compliance requirements, but at the same time the aim to be achieving security that is good enough in the context rather than perfect security.

The fifth key principle for success in IoT-related projects, he said, is to get organised around the new associated skillsets because IoT is changing every value-added function in a business.

“Companies therefore need to build a governance framework and define an IoT programme because it is not a one-off event and you need roadmaps because it is probably going to lead the way you do business in future,” said Eriksson.

“Companies need to be agile and have the processes for testing proof of concept to be able to take things to market first because in some IoT solutions, it will be a question of the winner taking it all and it will be difficult if you are not first to market in some industries,” he added.

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