nanoblog #2 Digitalization and IIoT: to D or not to D
Ever seen SharkTank? No? Well I highly recommend that you do. Enthusiastic innovators pitch ideas to a bunch of investors(sharks) and based on their interaction, they get rewarded with an offer or are they being told by Mr Wonderful (Kevin O'Leary) to take their idea behind the barn and shoot it.
#LinkedIn and internet, in general, is full of great ideas and light bulb moments. Everyone has a world changing idea- startups and enterprises alike; and far too often innovators specially in Industrial world have found budgets and investors for these ideas with the promise of Digitalization. This is going to be a 2 part article.
In this first part we try to setup the problem as listed below:
Problem statement for IIoT?
Teaser of value modelling?
In the upcoming next p, we will address
Value modelling with IIoT usecases etc,
and most importantly-
If you have an idea for digitalization in IIoT domain, do you need to take it behind the barn or does it actually make any business sense?
Lets start with first part with simple story to look at this:
There was a car manufacturer. He made cars quarter after quarter and had a double digit market share in his region. Margins were in 1 digit, growth was one digit, cost was one digit too.
One fine day, a new startup entered his domain. A few months later, another one entered and by the end of the year, he was swarmed with competition. These were cheaper alternatives, they were not as efficient and sturdy as 'our' car manufacturer's cars. 'They will never last', he said. 'They can't compete with the quality of my cars', he announced. A drop of sweat running down the back of his ear as he spoke.
By the end of another quarter, the market share now dropped to single digit as well and he was barely hanging by a thread. He called in his assistant and gathered all his department heads for production, quality, sales, marketing, finance etc. He gave them 1 week time to do find out what was happening. How can a 50 member startup compete with us, who have 10 years of dominance in the market.
They met after a week. Reports were presented and he listened in keenly.
"Well what is it? We are spending millions into research and development, innovation and center of excellence. What are these kids doing which we are not. "
Somebody mustered courage to speak. "They are tech freaks. They invested in the latest tech to Digitally transform their business using IIoT. They are able to produce cars much faster than we do in half the cost. The quality of their cars is below our benchmarks but it is improving gradually and if we don't do something they will surpass us soon. Our market research shows, customers don't seem to care and they know what they are getting into.".
There was a moment of awakening. Budget was allocated, team was formed, they hired a Business Consultant and hoped for the best. He worked a few weeks to analyze the car manufacturer and again came back with the report.
"What you need is digitalization of your enterprise. Your innovation effort is Sustained innovation where as your competitors are doing Disruptive innovation. Customers want to pay less and are ok with quality of your competitors vs your high price high quality products and secondly there is no disruptive innovation and change in business models. You are sticking to the same business model with which you started. You need digitalization to change your business model to stay competitive in the market" , the consultant announced.
"You care to explain what you mean?", the owner interjected.
"Well you can say-"
Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities
Think of it as injecting technology like IIoT, Analytics, Industrial Edge, SaaS applications, etc to your existing business Assets, People and Processes, to formulate a new business model which will in turn increase revenues, decrease costs or produce value like customer retention, growth, satisfaction and other intangible business goals.
"I don't understand, we already have all the latest systems like ERP, CRM, MES, LMS, SCADA and an entire IT department which is supposed to take care of the technology. What are we missing? " the owner retorted.
"Well you have the different system of records. But what you miss is breaking the silos of IT and OT data buried in these systems, to visualize the health of your assets and processes, to take decisions on conditions and system generated insights and recommendations to tell you when and what to do to optimize your business.
Few months passed. The car manufacturer, invested a ton in his digitalization project. He invested in Edge technology with latest sensors, cutting edge -edge analytics applications. (see what I did there : ), Invested in diy IIOT platform, with analytics capabilities, and incorporated all the technologies he got recommended like Data Mart, Data Lake, Data Warehouse, Business Intelligence, etc, recommended by all experts.
The department heads were very happy, they renamed their teams, had dedicated applications to monitor everything, and had to log lot of learning to understand the new applications. Everything went hunky dory for few months, then the problem started.
The cost of infrastructure started ballooning, there was 10 times more data from those extra sensors they installed. Data Analytics became slow and expensive but mostly it was incoherent as the end goal was missing. There was no strategy to handle the data, leave alone the insights. Operators became more confused. There was no clear value of the digitalization efforts. Costs further grew as bills coming in with the home grown solutions. It was a chaos.
The consultant was called in again. He analyzed again the problems of this implementation.
"Where is my profit? Where is ? Where is my reduction in costs? We invested a fortune in this project, we did everything exactly as you said but we still don't see any single benefit you promised." , the car manufacturer squealed.
"Well I beg to differ. You did invest in the digitalization. But you missed the most important part. You did not do any value modelling. You substituted value modelling with technology stack. That's not what I meant when I said Digitalize.", he explained calmly.
The most important step in Digitalization journey is to start with a strategy and outcome for digitalization. How will your digitalization effort help in changing business model and business value. Are you creating value for your end customers or not.
What is that value and how can you monetize it?
This is where value modelling comes into play.
Value Modelling for Digitalization using IIoT has 4 aspects-
- Value Proposition
- Business Requirement Definition
- Model/Digital Twin( Cyber Physical Model )
- Application to control model
- Analytics for generating insights
3. Technology.
Technology comes last. It is a very important part but you cannot skip the first 2 steps to deep dive into technology.
The outcome of value modelling would be to answer if the incremental cost is greater than incremental value and whether it is a good idea. Stay tuned for part 2 where we will address the techniques of value modelling in detail and arrive whether or not it makes business sense to invest in your digitalization idea-
Director Data Engineering @ Austin Data Labs | Technical Leadership, Data Science
3 年You nailed it Ashish! Innovation for the sake of innovation without alignment to business goals and values are the biggest mistakes that most new CIOs are making in todays world. Everyone wants to be the next Bezos or Musk! We work with our customers to understand their needs and generate insights that gives them the biggest bang for the smallest tweak. Often the customers know this themselves and only need the data and intelligence to back them up to take the leap. Often I have also found that the paths to big success is not the most expensive or disruptive one but the one where the pace of technology change goes hand in hand with process and thought leadership.