Industrial Internet Nothing or Everything

Internet of Things, Nothing or Everything?

Ilkka Lipas* 11.9.2014

Internet of things, nothing or everything?-‐ Impact on Business models

The storyline today 1.  Internet of Things background – Behind the hype

2.  Our choices under uncertainty – Business models and roadmaps

3.  Cases of early adopters and likely winners

© Talent Vec*a 2

Internet of Things – Background

© Talent Vec*a 3

Global •  Previous terminology used: automa*on, telemetry, telema*cs, remote automa*on. Rising interest / hype globally now.

•  Huge investments in China, in Wuxi as SEZ •  Japan inves*ng especially to observa*on of natural environment

•  USA focusing especially to military technology, environmental monitoring, intelligent transporta*on, industry applica*ons (GE, Cisco, IBM, HP, …)

•  Germany inves*ng in Industrie 4.0 project (industry compe**veness)

AcBve companies •  In Finland: ac*vely involved telecom operators, SME companies and users (such as facility management, industry, transporta*on, healthcare, consumers)

•  Telecom operators driving B2C applica*ons •  SME companies focus on individual solu*ons (e.g. remote control/monitoring)

•  Large companies (such as Schneider, Siemens, ABB, …) focusing on new product/service development

Finland •  Internet of Things – VTT’s one of four research focus (15 MEUR budget); machinery/equipment manufacturers and smart ligh*ng solu*ons. Key expert prof. Heikki Ailisto, VTT Technical Research Centre of Finland

•  Digile Oy (21.8.2013) – ICT capability based, 46 companies and en**es as owners (SHOK), former Tieto-‐ ja vies*ntäteollisuuden tutkimus TIVIT Oy hhp://www.internetoihings.fi/

•  Other key persons: Dr. Hannu Kauppinen, Head of NRC, Nokia and Heikki Huomo, Reac*ve Technologies

Time

Inno

vaBo

n

Source: Adapted from GE Industrial Internet report

Emerging new capabiliBes

Wave 1 Industrial revoluBon

Wave 2 Internet revoluBon

Wave 3 Internet of Things (IoT)

Internet of Things – Background on potenBal applicaBons Current challenge are lack of standardizaCon and lack of connecCvity penetraCon

© Talent Vec*a 4

“Local business opportuniBes” •  Household automa*on (ligh*ng, security, energy, air condi*oning, …)

•  Remote electricity consump*on measurement

•  Asset management •  Proac*ve maintenance services •  Remote security solu*ons

“Global business with global benefits”

•  Environmental monitoring •  Smart energy usage •  Smart Ci*es •  Smart Grids

“ConnecBvity within a business” •  Smart street ligh*ng •  Military technology •  Mobile Educa*on •  Mobile Health •  Mobile U*li*es

Busine

ss opp

ortunity

Global

Local

Low High Scale of connecBvity penetraBon

“Global/regional business with local benefits”

•  Smart car solu*ons •  Opera*ons over distance •  Logis*cs transparency, tracking of things (RFID etc.)

Impacts to business operaBons

© Talent Vec*a 5

Service market = market enabled by machine-‐to-‐machine technology

Short/mid term impacts: •  This is a must to understand for strategy

work, opera*ons, processes, plamorms, business models, service product development, IT architecture, ….

•  Beher use of exis*ng technologies (wider adop*on of B2B solu*ons)

•  Business planning and opportunity analysis for M2M solu*ons

•  Proac*ve capability building for M2M solu*ons

•  Business view point and revenue logic renewal •  New service solu*ons •  Management of networks

Long term impacts: •  New service product crea*on for future •  Building ecosystems – networking within

businesses •  Calcula*on capacity – huge amount of data •  Analy*cs capability, business intelligence •  People capabili*es, new competences

Source: GE Industrial Internet report

Focus a

reas

Bene

fits

IoT has implicaBons to most industries Case examples

© Talent Vec*a 6

Retail HoReCa TransportaBon Industries

•  ”Op*mized shelf replenishments”

•  Sensors measure online product availability

•  Improved product availability

•  Beher product traceability

•  Sensors in public premises measure customer flows and provide quidance to the personnel

•  Enhanced resource u*liza*on

•  Improved customer experience

•  Vehicles communicate with each others and with infrastructure

•  In near future: ”internet-‐of-‐vechicles”

•  Diminished rush hours •  Improved security •  Enhanced

environmental footprint

•  Sensors measure equipment or process opera*ons and op*mize ac*vi*es (e.g. proac*ve maintenance)

•  Improved produc*on processes

•  Enabling new pricing logic based on usage and customer benefits

Case Study: Bosch SoQware for Services 4.0

© Talent Vec*a 7





© Talent Vec*a 8

The hype and reality – Should we just wait and see?

© Talent Vec*a 9

—Four Levels of Environmental Uncertainty—

Source: Courtney, Kirkland and Viguerie, “Strategy Under Uncertainty

1

2

3

True Ambiguity

Alternate Futures A Clear-Enough Future

A Range of Futures

Typically we can see four types of decision making situaBons based on level of uncertainty

10

?

Firms will have the opportunity to explore a range of futures, in an uncertain environment that is just beginning to take shape. Scenario-work and business options are best tools.

Firms already experience the impacts of a change in technology/business platforms, market requirements or regulation , and more strategically oriented companies have begun to map outcomes and possible end games

Firms have no clue where the business is going; extreme short termism prevails, some players take strategic bets based on scenario views

Firms have clea view where the business is going; execution is key differentiator

In digitalizaBon defensive strategies have not played-‐out favorably, nor have unadapBve high bets

11

—Strategy Under Uncertainty—

Source: Adapted from Courtney, Kirkland and Viguerie, “Strategy Under Uncertainty”

Shape the future Play a leadership role in establishing how the industry operates for example: - setting standards - creating demand

Adapt to the future Win through speed, agility, and flexibility in recognizing and capturing opportunities in existing markets.

Reserve the right to play Invest sufficiently to stay in the game but avoid premature commitments.

Wait and See Observe the changing environment and assign someone to research the options.

1. 2.

3.

What could be the future with IoT? -‐ four scenarios

”Global game” Global players with strong IT & service capability

dominate

”CalifornicaCon” Room for many types of players

”Malnutrion everywhere” Few regional/

global giants with limited

advantage of IoT,

”Regional Monopolies”

Regional/Global early adopters dominate

12

Con*nuous polariza*on of wealth within and between countries, restlessness surging, wars , Economic slump

Economic and poli*cal issues resolved, moderate growth restored

IoT plamorms exist: MW, bandwith and cybersecurity issues resolved

Con*nuous issues with cybersecurity and lack of unified middleware, congested bandwiths

CalifornicaBon: New Industrial RevoluBon

© Talent Vec*a 13


On Demand making of everything

Lean value chains for everything: ConsumeraBon of businesses

Raw material produc*on

Consumer customer

Sub produc*on Tier 1

Final assembly

Pre & aier sales service

Retail Sub produc*on Tier 2

Distribu*on centers

X X X X X X X X

Servitazion of everything

John Deere fits sensors to its tractors and agricultural machinery and makes the readings available on its myjohndeere.com and Farmsight services. These help growers establish op*mum condi*ons for their crops, and also lets John Deere forecast demand for spare parts.

What could be the future with IoT? -‐ four scenarios

”Global game” Global players with strong IT & service capability

dominate


”Malnutrion everywhere” Few regional/

global giants with limited

advantage of IoT,

”Regional Monopolies”

Regional/Global early adopters dominate

14

Con*nuous polariza*on of wealth within and between countries, restlessness surging, wars , Economic slump

Economic and poli*cal issues resolved, moderate growth restored

IoT plamorms exist: MW, bandwith and cybersecurity issues resolved

Con*nuous issues with cybersecurity and lack of unified middleware, congested bandwiths

New global open plamorm providers a la Google create a safe business arena

for solu*on innovators

Na*onal pride and short term greed take over ,

states as cybercriminals

Na*onalis*c leadership gain power, behind the

scene tradewars Everyone for my country,

Regional solu*ons, ”China, Japan”

Statemanship appears, Realiism takes over Opportuni*es for

innovators and global solu*ons

”Silicon Valley”

Na*nalis*c par*es/dictators gain power, trade-‐ & other wars Everyone for himself,

Local/regional solu*ons, ”La*n America”

Statemanship appears, Realism takes over Opportuni*es for

secure closed solu*ons ”West pre 2010”

Scenarios and your strategies for a roadmap?

1.  Must Do’s – What we need to do which ever scenario unfolds 1.   Service mindset and business models 2.   Value chain & end-‐user customer focus 3.   Social Media/Digitalisa?on investments with immediate customer value

2.  Strategic choices – Decions that play out in most likely scenarios 1.   Globalisa?on & specializa?on vs jack of all trades 2.   Focus on spearhead IoT solu?ons (vs cashing on exis?ng brand value) 3.   Focus in the ecosystem (vs value chain integra?on)

3.  Gambling– strategies that play out only in some unlikely scenarios 1.  Best friend of the local poli*cians & civil servants – forget customer value

15





© Talent Vec*a 16

Three Areas where to Reinvent Business Models with IoT

17

Shape the future

1. Value CreaBon System 3. Targeted Customers

2. Customer Value Delivered

DramaCc re-‐engineering of the value creaCon system: ”Amazonize” your services

DramaCc re-‐conceptualizaCon of customer value: ”AppleCze” your soluCons

DramaCc re-‐definiCon of the targeted customer: ”Xiameterize” you Offering Source: Modified from original model by Professor Anil Gupta

Case Mohawk: Redefining Value CreaBon System

11/09/14

18

1. Value CreaBon System

Source: Mohawk website

Case Mohawk: Selling paper from mill to the door – and gaining customer insight

19

1. Value CreaBon System

Source: Mohawk website

Case Caterpillar: Making mining more efficient with informaBon

© Talent Vec*a 20


The real cake: Instant learning from the installed base to improve produc*vity of mining opera*ons

Informa*on is more valuable than just automa*on

Not selling mining equipment or automa?on BUT constantly improved produc?vity!

Source: FT & Caterpillar website

Caterpillar ProducBon system is the heart of quality and customer saBsfacBon

21

Visual, real-‐*me process monitoring

Quality gates before products are moved to delivery/next stage

Dealer network as a learning vehicle


Source: Caterpillar public presenta*on

© Talent Vec*a 22

Case Xiameter: Redefining Customers

3. Targeted Customers

Source: IMD Case Study

Case Xiameter: Redefining Customers

23



© Talent Vec*a 24

Case Xiameter: Building A Web-‐enabled Business Model



Conclusions? -‐ Get Connected!

1.  If your business s*ll determined by OEM/Agent customer requirements –learn the needs of the user-‐customers

2.  If you s*ll design, sell and deliver only physical products –develop services and service culture (and not just spareparts business)

3.  If you are not yet in solu*ons business – get there

1.  If you are not con*nuosly developing and monitoring your processes –start doing that

2.  If you are not connected to your partners and society through web & social media – get it going

© Talent Vec*a 25

End Summary: Only the bold (and adapBve) win!

26

”N e v e r tell me the odds” •  Han Solo, Star Wars

www.talentvec*a.com

© Talent Vec*a

Technology

Industrial Internet Nothing or Everything