Industrial Internet of Things can turn traditional manufacturers into service providers, writes Reijo Smolander, Senior Advisor and Program Director for Industrial Internet at Finpro.
The other day, I came across this article about Industrial Internet of Things (IIoT) by Environmental Engineering magazine.
The article is a good read. However, I am tempted to elaborate further on the issue, even more so as my good colleague is interviewed in the original piece.
As the article highlights, IIoT is well fit to help decision-making within companies and therefore has a lot to do with the likes of data acquisition, analytics and connectivity. Obviously, IIoT is about connecting stuff to the Internet, so you need wireless connectivity as well as ways and means for gathering and analyzing data.
However, the real game-changers with IIoT are new services, products and business models. It is important to understand what this means, so I will try to be as clear as possible.
We have probably learned from Economics 101 that the concept of supply and demand plays a substantial role in a market economy. Every one of us, both people and businesses, have different needs that we desire to satisfy via markets.
IIoT enables supply to be as sophisticated and demand-based as possible by making a sensor- and data-based connection between the two. It is like a buffet where you are charged on real-time, based on the exact amount of consumed food.
For instance, this is why aircraft engine manufacturers do not necessarily have to sell their engines, but rather they can sell the operation time directly to airline operators. With sensors all over an engine, a manufacturer can follow a variety of things, including the operation time. A traditional aircraft engine manufacturer’s profits coming not from engine sales but from leasing services is a perfect example of a new business model and a new service enabled by IIoT.
After all, airline operators do not have a demand for aircraft engines per se. What they really want is an ability to fly. That is the kind of supply engine manufactures can give them with IIoT. With a data-based demand connection, airline operators become free to focus on moving passengers across the globe, as they are not forced to invest heavily on expensive airplane engines. Instead, let the manufacturers focus on engines because it is their competence area.
The same logic applies to a majority of investments. For the user, they all have a business function that is not an end in itself. Thus, most of the time various usage-based service models satisfy the end-customer’s demand better than simple sales of goods.
Now, IIoT unfolds plenty of other opportunities as well, but I will not list them here, as the logic does not really change; in essence, IIoT is about optimizing supply and demand and creating altogether something new.
About the author
Reijo leads our Industrial Internet growth program, Capitalize Your Knowledge, as the Senior Advisor, Program Director. He is a true Industrial Internet enthusiast with more than 20 years’ telecom sector experience and a special focus on the transition into service business. Through our program, Reijo helps Finnish ICT and IoT SMEs to expand and strengthen their international business.
“My passion is to make the most out of B2B services. Motivating and helping companies to expand their offering into services. Identifying new business opportunities through looking at the world from customers’ perspective. Networking and finding a true win-win solution with your business partners.”