The Bumpy Road to Smart Systems Adoption

For every gain in the Smart Systems arena we see, there seems to be five more obstacles and misunderstood opportunities.?On the technology supply side, platforms, infrastructure and marketing promises alone will not auto-convert into successful customer solutions.?For the adopters – equipment and machine manufacturers, and end users – trying to address these new emergent opportunities with traditional risk “reductionist” processes and clueless IT organizations under siege will not drive home runs or move you around the bases.

Everyone in the Smart Systems and Services arena seems to be stuck these days.?Stuck in a proof of concept; stuck trying to get leadership to invest; stuck trying to get past the “platform” to create real customer value creation; stuck trying to figure out how to wire together these over complicated multi-vendor solutions – stuck, stuck, stuck!

Perhaps, we need to be thinking about all this differently?

SMART SYSTEMS FINALLY TAKES THE FIELD

This is a story about the continuing saga of Smart Systems adoption, but it’s not a story about technology per se. The basic tech—think of it as the pipes or plumbing—of the connected products and machine world has been in place for many years now. The water—data—is being channeled through that plumbing every day, from connected sensors in home devices and vehicles all the way up to massive industrial machines.

But what subsequently happens to that flow of data is often a different matter altogether. We are now in the third decade of the 21st?century and the vast majority of sensor data still goes unharvested, unanalyzed, and often completely ignored by a huge percentage of businesses around the world. How can it be that our leaders continue to shun the very intelligence that could optimize their processes and lead them to much greater success in the marketplace?

Part of the answer is that raw sensor data is not in itself actionable business information. It requires a complex process of normalization, filtering, fusion with other data sets, and serious analysis in order to become?useful for business decisions. Fair enough, but here too the techniques have long existed to make this transformation. We live, after all, in the era of “big data.”

Perhaps applying these techniques costs too much money, or the sheer volume of sensor-data is too heavy to be crunched for business purposes?

No, not really. There is always a cost, of course, but the benefits are usually crystal clear. And if the data-stream seems too heavy to be useful, companies should come up with better questions for those data to answer.

Here at Harbor Research, we have said more times than we can count that technologies need to be both mature and well aligned to open the path to progress. When either of those qualities is missing you can count on seeing hacks, kludges and proprietary Band Aids used to bridge the gap, with a temporary net benefit and a bigger clean-up job than you had before they were applied.

We now have that magic blend of?mature and well-aligned technologies?across many verticals, yet most of our raw data might as well not exist. This is why we insist that the perennial failure of IIoT to “get off the ground” isn’t a technology story at all. It’s much more a story about business models and business maturity—or, sad to say, the lack of them.

THE BUMPY ROAD TO DIGITAL ADOPTION

Market adoption for emergent Smart Systems solutions is just not there yet. It is hamstringed by both business and technological obstacles which will continue to delay adoption until they are addressed. This unfortunate reality will mean the death of many projects, programs and ventures.

Outside of technological challenges, Smart Systems solution suppliers are plagued with a number of business challenges, true for any next-gen technology provider. The false-start and empty promises from many OEMs and software players left a sour taste in some enterprises’ mouths in regards to the ROI payback from these new connected systems. Many so-called digital initiatives strike out and frequently die in the lab or get stalled in the proof-of-concept jungle – never to see the light of day. Encouraging the active participation from?all stakeholders?of Smart Systems solutions is a must, from the executive who will find the budget to the field-tech using the system, all feedback must be listened to and actively addressed.

Unfortunately, while most businesses are attempting to embrace new technologies and make bold pronouncements about digital maneuvers and strategies, many are not yet embracing new business models of any kind.?Thus, we believe they are in serious danger of moving aggressively to implement—by about 2030—a vintage 2015 strategy.?In so doing, they will destroy value rather than create it.

STEALING THIRD BASE

Mature technologies need to be paired with mature business thinking. But frankly, after hearing “digital maturity”?bandied about for years by people who use it as a substitute for real thinking, we confess to being pretty tired of it.

We’d rather use the less pretentious baseball analogy of “going around the bases.” When an equipment OEM succeeds in “sensing up” its hardware to turbo-charge delivery of services, they’ve reached first base. Once there, they often make more money on services than they did on the initial product sale. Unfortunately, most OEMs get drunk on the big margins at first base and never make it to second.

When a company successfully reaches the “as-a-service” phase of the story, that’s second base. At that stage, the system and service provider has made the successes of first base?easy for users to consume. That’s an important addition to the business model because it means that delivering value to the customer is just as important as delivering it to the provider. But oftentimes, second base is as far as the Smart Systems story goes.

SHARING RISK

What will it take to really drive hockey stick adoption of new data-driven solutions??Much more than antiquated stage-gated processes. When traditional business practices, company culture and operating models inhibit the required creativity to effectively drive new digital innovation and value creation, or when traditional operating models constrain an organization’s ability to develop digital capabilities, that is when you need to seriously consider throwing out all of the old school rules.

We spend a good deal of our time searching for exceptions to this rule and we think we have found a very compelling example being developed by the Hartford Steam Boiler Inspection and Insurance Company (HSB).

This traditional insurance company, founded in 1866, is now in the process of setting the stage to steal third base by addressing new, equipment-as-a-service delivery models . More importantly, they’re innovatively adding “shared risk” to the business model, thus creating even more value for the customer and easing the many obstacles that inhibit adoption of new innovations.

The problem with stealing third base is that our business culture does not democratize the things that make sharing risk easy, which in turn drives more assured outcomes for the customer and users. Typical business thinking remains overly risk averse and not customer-centric. Businesses want to protect IP and do things in secret.

By contrast, HSB offers its partners numerous new possibilities to mitigate risk and ensure new data-driven outcomes can be realized from connected products and systems. These include, among others, warranties on business outcomes. Offering such warranties (for example, on operational efficiency gain, maintenance cost reduction, zero-unplanned downtime, etc.) is a unique approach to minimizing risks for both manufacturers and end customers. HSB not only provides this warranty to its direct partners but also enables the manufacturer to offer it to its customers as well.

When the idea of sharing risk in this way becomes perceived by the business community as valuable enough (or necessary enough) to force the secrecy instinct to give way, data,?ecosystems and collaboration?will be added to business models and lead to a rush to third base and home plate. HSB is making much clearer what the possibilities of advanced technology can be when matched with equally sophisticated business thinking.

Download our Growth Insight “Capturing Value from Growth Opportunities: Equipment as a Service” here.