New Research Shows IoT at Inflection Point in Product Design
Shawn Wasserman posted on December 18, 2017 |
IoT survey shows increasing adoption of the technology.
In 2014, less than 10 percent of consumers had an Internet of Things (IoT) device other than their cellphone. According to new research, 60 percent of product design teams are at least evaluating an IoT product. 

Are product design teams facing an inflection point where IoT is becoming the norm? A recent survey from suggests that this is true, as 25 percent of respondents have already launched an IoT product or pilot project.

“The consumer sector is already seeing this as a revolution, but the industrial sector is at the tipping point,” agreed Jaganath Rao, senior vice president at Siemens. “I believe we will really see an exponential curve for IoT adoption in industry in the next couple of years.”

Not convinced? The survey provides hard data suggesting that your chance to be a first mover with the IoT in your industry is dwindling.

IoT Adoption is Reaching an Inflection Point

What data suggests we are hitting an inflection point? First, two-thirds of respondents in the survey thought that IoT adoption is at least moderately important.

Additionally, the bell curve of how important respondents consider IoT adoption seems to mirror that of a typical technology adoption curve. Those who rate IoT extremely important are the innovators, those who rate it moderately important are the early and late majority, and those who take no notice of the importance of IoT are the technology laggards.

Technology adoption curve sheds light on survey data suggesting a ramp-up in IoT adoption. (Image courtesy of Wikipedia.)

Technology adoption curve sheds light on survey data suggesting a ramp-up in IoT adoption. (Image courtesy of Wikipedia.)

But, for Rao, his firsthand knowledge from selling IoT technology seems to speak for itself.

“Everybody is testing [IoT] and everyone is trying it,” said Rao. “Every customer we speak to is working on a proof of concept (PoC) or proof of value (PoV) because, for them, it’s new. We like this idea as we are used to delivering solutions and are interested to see how these PoCs and PoVs are going. You will start to see adoption and ramp-up very quickly.”

So, the data and Rao’s experience suggest that product design teams are warming up to the idea of the IoT.

If your organization is still lagging on its IoT implementation, then you might have missed your chance to be an early adopter or innovator. However, you can still jump on the train and become an early majority.

“There are business benefits to implementing the IoT in new products, ranging from how you differentiate your products to how you reduce your costs, or improve your profits,” said Rao. “But, if you don’t implement the IoT soon, your company risks missing the bus. If you miss the bus, you will be disrupted. So, I think we are at that tipping point, but there will be a couple of years before it really ramps up.”

Who is Implementing IoT into Products?

Which industries are implementing IoT into their products?

According to the survey, about 60 percent of those producing assembled goods or components are either evaluating, piloting or deploying IoT. What is surprising to see is that for those producing raw materials, the number grows to over 70 percent.

In other words, the raw materials industries are as far along in their IoT journey as finished goods producers.

This seems a little counterintuitive as we can all imagine the need of an IoT consumer good (à la iPhone), but it’s harder to imagine IoT raw materials.

But take this example: you’re a chemical supplier of, say, plastic resin pellets, and you want to maximize your inventory, throughput and distribution without letting any of your customers run out of their supplies.

You could rely on your customers to order their plastics, but who is to say that they will know the best time to order supplies to ensure that the raw materials will be delivered before they need to shut down production? Who is to say that when the customer orders their plastic that your supply line can deliver it without requiring overtime?

However, if you pack sensors on your customer’s containment units, you can monitor them through the IoT. In that case, you will know how fast your customers drain their supplies and will be able to ensure that you get deliveries to them before they are desperate, as well as know when is the most convenient time for your production lines.

How IoT is Changing Business Models

In fact, Rao suggests that a spin on this raw material IoT supply line has even led many companies to shift their business models.

He supposes, if you are selling compressors, for instance, are you really selling the equipment, or the capacity to create compressed air?

“Traditionally these manufacturers sold compressors to generate the compressed air,” explained Rao. “Now these manufacturers are looking for new business models. First, they gather all the information on their compressors by making them IoT ready. Then they start selling you compressed air with a performance and quality guarantee. You pay for the consumption and not the equipment. The OEM monitors and ensures the machine is working reliably.”

In other words, the compressed air companies can now shift their business models from offering a complete product—compressed air equipment—to now becoming a raw material supplier of compressed air with their “factories” on premise. But what is the benefit to this shift in business model?

Well, what Rao is describing is a more customer-centric economy, where you sell customers what they want. In this case, the raw material of compressed air, instead of the tools to make what the customers want. As the old adage says, construction workers need a quarter inch hole, not a quarter inch drill bit.

The benefit to this new business model is that the customer doesn’t have to deal with fixing compressor equipment that they neither designed nor built. When the IoT system signals that the equipment might fail, the compressed air supplier sends out a repair team before the customer even knows something is wrong.

As for the compressed air suppliers, these companies gain better control of their costs, income and the bottom line as they shift revenue from a point-of-sale system to continual supplier contracts.

Why is Industry Making IoT Ready Products?

Survey respondents were asked what their top reasons were for implementing IoT into their products.

It’s not surprising that reducing costs is one of the push points for the IoT.

One example that Rao gives is airbag suppliers and their ability to save money on recalls.

Rao notes that when a recall occurs, these airbag companies need to track down every single bag they have out in the field. They then bring these bags in, store them for a few years (as per regulation) and track down the cause of failure to improve the next iteration of the product.

“These tier two automotive suppliers were losing money and having trouble tracking down all of these bags,” Rao stated. “Now they are implementing a tracking and tracing system. This system is being put into place using an IoT platform.”

By keeping track of all the bags—and their data—companies can locate the bags quickly and use their performance data to generate faster root-cause analysis. This saves money and gets improved products to market faster.

Another popular reason that IoT is growing in industry is that customers are demanding it. To keep their customers engaged, they will need IoT data.

“A traditional problem for industry is that data sources are disparate, and they don’t talk to each other, so you can’t do data analysis with them,” said Rao. “Now, with IoT, you can connect the computerized maintenance management system (CMMS), production, product field data and all other data into a cloud repository. IoT operating systems like MindSphere also integrate various data sources. When you have that integration, you can perform advanced analytics on the data to determine many things, ranging from root cause analysis to process optimization. This will bring more improved designs, reliable systems, less waste and reduced operating costs.”

This all translates into ensuring that your product maintains a competitive advantage. It is therefore no surprise that IoT’s ability to gain or maintain an advantage was an important reason to adopt IoT, according to the survey.

With the competitive advantage of the IoT, companies can create digital twins that will help to improve their designs, ensuring that products meet customer expectations.

“When we design a product, it’s done with software tools like CAD. We are also able to simulate the complete function of that product in the virtual world. Thus, we create a complete digital model of our product called the digital twin. This digital twin can be used to compare real data on performance with digital models from design,” noted Rao. “From this comparison, you can then tweak your design and make your products better.”

Rao has a point here. IoT products appear to have a very positive review from both industry and consumers, as the survey found that 70 percent of IoT-enabled products either met or exceeded their expectations.

How Do We Grow the Adoption of the IoT?

While IoT adoption is growing, 33 percent of respondents to the survey still think the concept is unimportant. Further, 40 percent of finished goods producers, 39 percent of component producers, and 28 percent of raw material producers still have no plans to implement the IoT. How do we convince these laggards to adopt this technology?

Rao said that the majority of those that have no plans to implement the IoT lack an understanding of the technology.

“A lot of customers know they need to go through the IoT transformation, but they don’t know how to implement it, and they don’t know where to start this journey,” Rao said. “So, Siemens is working with them. We do a lot of handholding and enable them to start small by connecting small assets first, such as programable logic controllers (PLCs), to the IoT platform. It’s important they learn where to start.”

Once again, Rao is right on the money with respect to the survey results. Those surveyed noted that the biggest obstacle to launching their IoT products was a lack of IoT skills within their product teams. As a result, vendors offering IoT training, like Siemens, should go a long way toward bridging the IoT skills gap and getting connected products to market faster.

Another large portion of Siemens’ training revolves around the concept of IoT security. Rao notes that for many looking to implement IoT, “security isn’t a showstopper but is of great concern.” He added, “My experience is that once you take them through the security, they worry about it less.”

Rao notes that the real challenge with IoT adoption is when customers don’t want to share their data on the cloud.

“The idea to hold onto their data is counter to assessing the data,” argued Rao. “You can’t do that if you don’t have a cloud computing repository to weigh various data. Even if you can provide the cloud systems in house, it’s expensive to build it on premise. Once customers learn this, they tend to start talking about how flexible they can be with their data. It boils down to what can be done on the edge and what can be done on the cloud.”

So, the key to growing the IoT is education. Therefore, if your interest is piqued but you are still not convinced that you need IoT, then perhaps you might want to learn more from the survey

Siemens has sponsored this post. They have no editorial input to this post. Unless otherwise stated, all opinions are mine. —Shawn Wasserman

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