The IoT-Data Centric Enterprise

W. David Stephenson Stephenson Strategies

December 17, 2015

I’m so pleased to be with the Hong Kong Internet of Things Association tonight. This takes me back to the early days, two years ago, when our group in Boston was just starting, and we had only a handful of members. Now we have more than 1,700 members, and have become the real IoT community that I dreamed of when I created the group. I look forward to talking later about lessons we’ve learned, and how they may help you grow.But first I want to talk about my latest area of interest in the IoT, one that I believe can truly transform corporations: the IoT-Data Centric Enterprise.

Is there more to the IoT than cool gadgets?

Don’t get me wrong: I love the incredible things established companies and start-ups alike have been able to create using the Internet of Things. They are already creating profits, satisfying customers, and changing our lives.But I do wonder: does our focus on the specifics of IoT technology blind us to its larger potential impact?

What About Real Transformation?

I’d like to talk with you today about a more inclusive, far-reaching transformation in every aspect of business that the IoT makes possible.

IoT Data as Hub of Cyclical Enterprise!

That is the concept of real-time IoT data, shared instantly by all who need it, as the hub of a cyclical enterprise. Let me explain…

Tech Limits Dictated Organizational Styles

In the past, technological limits dictated the kinds of possible organizational styles — and how we made things.

Hierarchical and Linear

What little data was available about operations and products was fragmentary, usually gathered after the fact, and of limited use. That dictated both company organization and manufacturing styles.Companies were hierarchical, because managers controlled distribution of what data was available, on a top-down and need-to-know basis. Typically, one department would analyze data based on its area of expertise and decision-making, then pass it along to the next department, whose purview would be similarly limited.Manufacturing was linear, as typified by this photo of Ford’s massive 1.6 x 1 mile River Rouge plant, where iron ore was unloaded at one end, and finished cars emerged from the other. Similarly, the supply chain and distribution network were also linear, ultimately ending with sale of the product. After the customer took control, heaven knows what happened to the product. We could only guess.

Now: Instant Sharing of Real-Time Data

by Everyone Who Need It Changes All!

Today, with the IoT, those historical limits can be repealed.Instead, massive lakes of structured and unstructured data gathered by sensors in manufacturing equipment, massive earth movers in the field, appliances in our homes, and even ones in our digestive tracts that we swallow, allow everyone who needs that data to improve their work and decision making to instantly share that data. That changes everything, and, I think, constitutes the real IoT revolution.

Circular Enterprise• Needed to save

planet: no more “take-make-dispose”

• Restorative or regenerative by intention & design

• But how?

This also calls for a new model both for the economy as a whole, and for corporations specifically, that is no longer hierarchical and/or linear.I believe there is such a model, gaining support in environmental circles, especially in Europe, and with leading consultants such as Accenture and McKinsey: the circular economy.It’s not only advantageous for companies, but also essential to survival of the planet, which can no longer afford the “take-make-dispose” model of the old linear approach. We have to reduce our extraction of raw materials and our energy use, especially of fossil fuels, and recover materials rather than junk them. But how to create this profitable, sustainable economy?

Data as Hub

The key — and something that I haven’t seen mentioned in any of the writings on the circular economy model — is to place IoT data right at the middle — the hub — of the economy as a whole, and individual companies as well. Everything we do can, and must, revolve around this data.The results will transform every aspect of business.

Collaboration

• Departments don’t work in isolation.

• Share data.

• Address issues simultaneously.

• Synergistic solutions, find problems early.

Most important, it will place collaboration foremost, not only within individual companies, but also externally. That is a dramatic change from the past, zero-sum approach, in which knowledge you had and I didn’t, made you a winner, and me a loser — and made collaboration something only chumps would pursue.Now, the ability I mentioned previously, for everyone who needs it to instantly share real-time data, makes collaboration the winner’s approach.What will that mean for companies?First, it will mean that departments will no longer get data sequentially and manage their functions and make their decisions in isolation. Instead of that linear approach, they will be able to jointly consider the data, eliminating many of the problems that came from working in isolation, especially since so many decisions are interdependent. For example, now that so many products can be monitored after the sale, both the marketers and designers can discuss whether this requires synergistic solutions that are now possible, such as leasing products instead of selling them, and/or providing software upgrades over time that may cut replacement sales but breed customer satisfaction and create new revenue streams such as selling the operating data to the customer.

Unprecedented Precision

• Every aspect of manufacturing inte-grated, self-regulating.

• just-in-time supplychain & distribution.

Making IoT data the hub for the circular economy will also lead to unprecedented precision in many areas, boosting efficiency and profits while reducing environmental impacts.What passed for “just-in-time” supply chains in the past was really just a lucky guess: the data simply wasn’t accurate enough to ensure we got just what we needed, just when we needed it. Now, data will transmit M2M, and resupply will be triggered automatically, without human intervention. Nearby suppliers, rather than those half-a-world away, will have resurgence, because real-time delivery will trump lower labor costs. Siemens’ “factory of the future,” shown here, where they make 950 different products with only about 15 defects per million and has a 99% reliability rate, will be commonplace. GE’s Durathon factory, where the same sensors in every battery that monitor their operation in the field can also identify defects in the manufacturing process, will provide a continuum of data throughout the life cycle.

Unprecedented Precision

• Restocking will be automatic

• Customers willget customoffers based ontheir preferences

The same will be true for distribution and sales.This smart vending machine from SAP will not only greet those who opt-in by name with personalized offerings based on their preferences, but also shares the real-time data on purchases with a company’s logistics operations, so that, using M2M controls, a delivery truck can be automatically rerouted, without human intervention, to prioritize restocking at machines where weather data or other data indicates the need is greatest.

Revolution in Product Design

• Products more tech than “stuff.”

• Customers may be last step in product design.

• Rapid design cycles because of product feedback.

Perhaps no aspect of corporate operations will be as radically affected as product design. Products will require less “stuff” to manufacture and operate because technology will replace prior mechanical components. Perhaps no example is so dramatic as the AliveCor ECG monitor, which replaces a costly in-hospital machine that can only be operated by experts, with this tiny panel that fits on the back of an iPhone, can be operated by anyone, and produces an accurate ECG in only 30 seconds, as tested and approved by the FDA.Customers may even be the last component of the process, because they will be able to choose between built-in alternatives governing factors such as comfort or performance.As GE is already showing, in this data-centric world, real-time feedback on how customers actually use the products can isolate potential problems and/or opportunities, making it easier and quicker to design upgrades.

No Loose Ends

• Use systems dynamics thinking & tools

In every aspect of the economy, understanding of systems dynamics will become a critical part of thinking when companies are IoT-data centric. Using modeling software such as STELLA, companies will simulate all of their processes, to identify dead-ends, where data flows one way. Instead, the processes will be altered so that all are cyclical, in which continuous loops allow this new-found information from how things actually function to inform every aspect of corporate operations and create real understanding for the first time.

Environmental Benefits

• User Economy: fewer products, more use.

• Products upgraded, not junked.

Equally important, the IoT-data centric circular enterprise will be a win-win solution, not only building profitability and customer satisfaction, but also reducing environmental impacts. It will facilitate the Millennial-led transition to a “User Economy,” in which owning things is no longer as important as the ability to obtain and use them. Leasing will become more important, and the revenues lost in sales will be replaced by ones from add-on services. Products, because they will be increasingly electronic, will be upgraded through new software, reducing the need to replace them to enjoy the latest benefits. And, when they are finally no longer used, the built-in sensors will encourage recycling and re-manufacturing.

The Data-Centric Circular Economy

•unprecedented precision •collaborative decision making •products that delight customers

•new economic models

•a cleaner planet

So there you have it: my vision of the rapidly-emerging circular economy, with its hub being real-time Internet of Things data. It is a vision that capitalizes on the never-before possible opportunity to peer within things of all sorts and learn about their operations and status. Acting on that data, we can:* design self-regulating processes to fine-tune parts of a complex system base on feedback from other parts of the system. This will lead to unprecedented precision.*improve product design through feedback on how the products actually function in operation.*improve daily operations and decision-making by allowing real-time sharing of important data by all who need it, leading to unprecedented collaboration.*products that delight customers using feedback data on what they like and don’t like, and leading to more frequent, and targeted, upgrades.*new economic models that substitute services for sales.*and, finally, a cleaner planet.The Internet of Things is far more than cool new devices. It is an engine for fundamental economic change!

For Further Information:

W. David Stephenson

Stephenson Strategies

335 Main Street, Medfield, MA 02052 USA

(508) 740-8918

D. stephenson@stephensonstrategies.com

Twitter: data4all

www.stephensonstrategies.com