Driving Unconventional Growth through the Industrial Internet of Things
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Driving Unconventional Growth through the Industrial Internet of Things
The Industrial Internet of Things has been heralded primarily as a way to improve operational efficiency. But in today’s environment, companies can also benefit greatly by seeing it as a tool for finding growth in unexpected opportunities. In the future, successful companies will use the Industrial Internet of Things to capture new growth through three approaches: boost revenues by increasing production and creating new hybrid business models, exploit intelligent technologies to fuel innovation, and transform their workforce. By Paul Daugherty, Prith Banerjee, Walid Negm and Allan E. Alter 2
3
Daimler, with its Car2Go service, has taken
its business beyond simply building cars to
renting them almost as easily as buying milk
The Michelin Group uses sensors inside at the corner convenience store.
tires combined with analytics to coach
truck fleet drivers on how to save fuel. Taleris (a General Electric-Accenture joint
venture) deploys analytics to help airlines
minimize disruptions from mechanical
failures and weather delays.
The Industrial Internet of Things (IIoT) is a Predictive maintenance of assets is one using this approach to predict onshore and
major trend with significant implications such area of focus, saving up to 12 percent offshore oil pump failures to help minimize
for the global economy. It spans industries over scheduled repairs, reducing overall lost production. Executives at Apache claim
representing 62 percent of gross domestic maintenance costs up to 30 percent and that if the global oil industry improved
product (GDP) among G20 nations, eliminating breakdowns up to 70 percent.4 pump performance by even 1 percent, it
according to Oxford Economics,1 including For example, Thames Water, the largest would increase oil production by half a
manufacturing, mining, agriculture, oil provider of water and wastewater services million barrels a day and earn the industry
and gas, and utilities. It also encompasses in the UK, is using sensors, analytics and an additional $19 billion a year.6 Or take
companies that depend on durable real-time data to help the utility company a mining operation, where the ability to
physical goods to conduct business, such anticipate equipment failures and respond quickly conduct an assay of the ore when a
as organizations that operate hospitals, more quickly to critical situations, such as drill bit unexpectedly hits hard rock enables
warehouses and ports or that offer leaks or adverse weather events.5 miners to resume work in a fraction of the
transportation, logistics and healthcare time required before.7
services. However, there is more to the story.
Although companies are viewing and For now, at the dawn of the IIoT,
Not surprisingly, the IIoT’s potential beginning to leverage the IIoT as an manufacturers are going after the low-
payoff is enormous. The most conservative operational efficiency strategy, it also hanging fruit by improving the maintenance
independent estimates place spending offers rich potential for those that make and repair services they already offer. But
on the IIoT worldwide at $20 billion in equipment and products to introduce new some trailblazer companies are forging
2012, with spending expected to reach digital products and services, generating ahead with unconventional ways to use
$500 billion by 2020. More optimistic entirely new sources of revenue to improve the IIoT to provide value to customers,
predictions of the value created by the IIoT both the top and bottom lines. Separately including CLAAS KGaA mbH, General
range as high as $15 trillion of global GDP for owners and operators of equipment, Electric, Michelin, Virtual Radiologic Corp.
by 2030.2 such as companies in a process industry, and ZF Friedrichshafen AG.
there is a real opportunity for increased
Operational efficiency is one of the key revenues. The easy win is to avoid While these companies represent inspiring
attractions of the IIoT, and early adopters are downtime and plant and facility shutdowns, examples, it is important to recognize that
focused on these benefits. By introducing thereby increasing production throughput. the IIoT offers radically new ways to make
automation and more flexible production For example, a petrochemical producer can and think about products and to operate
techniques, for instance, manufacturers rely on predictive maintenance to avoid assets and facilities. Many companies
could boost their productivity by as much as unnecessary shutdowns and keep products are just now beginning to make the
30 percent.3 flowing. Apache Corporation, an oil and transition, and it may not be easy for some
gas exploration and production company, is industrial, transportation and service-sector
4
executives to capitalize on the opportunity growth play and a defensive maneuver for These companies are
to sell new digital offerings. However, today’s manufacturers, energy producers
those that hesitate could be quickly and service providers. If incumbents do not
identifying new growth
outmaneuvered by existing competitors and identify and exploit these opportunities, opportunities by adding digital
new entrants. (See “Will your products be new entrants and startups will begin to services and innovations
intelligent by 2020?”) influence and capture their customers.
to their product mix. Their
In fact, once industries become digital, they So how can executives at industrial executives see the vast
also become digitally contestable, meaning companies exploit the revenue-generating potential of the IIoT: the
companies from outside the traditional opportunities of the IIoT? Accenture’s
industry confines can enter and compete research on IIoT uses cases and current universe of intelligent
more easily. Think of Google’s moves into thinking, along with our conversations industrial products,
driverless automobiles, which are likely with clients and subject matter experts, processes and services that
to disrupt multiple industries, including suggests that executives must meet three
car insurance and government licensing. imperatives: boost revenues by increasing
communicate with each other
Another example is Apple’s HealthKit. The production and creating hybrid business and with people over a global
platform, which enables health and fitness models, fuel innovation with intelligent network.
applications to work together, brings the technologies, and transform the workforce
company into a healthcare data ecosystem for the IIoT. In addition, we outline seven
now occupied by caregivers, insurers and steps to help companies move forward
pharmaceuticals.8 quickly and confidently to harness the IIoT’s
potential.
To succeed in digitally contestable
industries with the IIoT, executives will
need to formulate new business models
and go-to-market strategies at the macro
level, rethink their core business and
operations, and introduce intelligence
into products, services, processes and
more. They will also have to open up their
manufacturing operations, production
facilities and product designs to new
information technologies. The IIoT is both a
5Boost revenues by increasing production
and creating hybrid business models
As stated in the 2014 Accenture Technology Asset owners and operators will spend on Digital services—offerings that combine
Vision, “Every business is a digital business,” these digital services to help them increase information, transactional and professional
the digital-physical blur is turning industrial their production and efficiency. They will services—will lie at the heart of these shifts.
companies into customer service companies.9 also invest in their own novel solutions to Some companies are already converting
Manufacturing, energy and other industrial improve the performance of existing assets products into product-service hybrids, which
executives tell Accenture that new services, and processes as well as collaboration across we define as connected, intelligent physical
competitors and ways of operating their the supply chain—whether the business is goods capable of producing data for use in
businesses will transform their industries.10 chemicals, mining, energy or agriculture. digital services.
Figure 1: How companies are finding opportunity through the Industrial Internet of Things
The IIoT presents companies with opportunities to upgrade and offer new services, improve products, and enter new markets. Consider how General
Electric, Michelin and CLAAS are going to market with product-service hybrids by adding digital services (shaded boxes) to their pre-digital products
(solid boxes). But even companies that do not sell products, such as Virtual Radiologic, can take advantage of opportunities to expand into digital
services.
General Electric Information
Services
General Electric’s aircraft engine maintenance
business, born out of its jet engine business,
is now moving to preventive maintenance and Commercial Scheduled Preventive Aircraft fleet
Equipment maintenance maintenance optimization
expanding into aircraft fleet optimization. offering
Services (GE Aviation) (Taleris joint venture) (Taleris joint venture)
categories
Jet engines Jet engines
Products (GE Aviation) (GE Aviation)
Pre-digital Digital New market
product line product line segment
Go-to-market approach
Michelin Information
Fuel consumption
reduction service
Michelin is helping truck fleet managers reduce Services (Michelin solutions)
fuel consumption and costs and allowing them
to pay for tires on a kilometers-driven basis. Commercial
Equipment Tires as a service
offering (Michelin solutions)
Services
categories
Tires Tires with sensors
Products (Michelin) (Michelin)
Pre-digital Digital New market
product line product line segment
Go-to-market approach
Information
Services
6
Machine Remote diagnostics Partner in ag info
Product Equipment automation services service marketplace
and optimization
or Service Services (CLAAS) services (CLAAS) (365FarmNet)These hybrids will be the primary vehicle These product-service hybrids should go well company’s Fuel consumption
product by capturing the data it
Information reduction service
to tap into this opportunity. They enable beyond incrementalServices
improvements, such as creates, as Virtual
(Michelin Radiologic does with its
solutions)
companies to create hybrid business models, feature changes; they must address unmet analytics service.
combining product sales and leasing with customer
Commercialneeds or solve critical business Tires as a service
Equipment
recurring income streams from digital offering
problems with breakthrough
Services solutions. (See (Michelin solutions)
categories
services. These digital services will also enable Figure 1.) However, these product-service
firms in resource-extracting and process hybrids need not be first to the market.11Tires Tires with sensors
industries to make better decisions, enjoy Nor must the serviceProducts
provider be the (Michelin)
same (Michelin)
better visibility along the value chain and company as the product manufacturer:
improve productivity in other ways. Pre-digital
a service provider can hybridize another Digital New market
product line product line segment
Go-to-market approach
CLAAS Information
Services
Farmers can operate CLAAS equipment on
autopilot, receive advice on how to improve crop Machine Remote diagnostics Partner in ag info
flow and minimize grain losses, or automatically Product Equipment automation services service marketplace
and optimization
optimize equipment performance. The company or Service Services (CLAAS) services (CLAAS) (365FarmNet)
is now partnering with other organizations to
provide information services to growers via a Farm Farm equipment
marketplace called 365FarmNet. Products equipment with sensors
(CLAAS) (CLAAS)
Pre-digital Digital New market
product line product line segment
Go-to-market approach
Virtual Radiologic Information Radiology
Radiology
workflow
Radiology
analytics and
Services interpretation SaaS benchmarking
vRad began life as an X-ray interpretation (vRad) (vRad) (vRad)
service. It has since expanded into the IT services
business, offering software services business and
Product Equipment
more recently an analytics service.
or Service Services
Products
Pre-digital Digital New market
product line product line segment
Go-to-market approach
Key
Information services sell data and insights or manage a market that Equipment services sell product operations and optimization services
sells data. or sell the product using an as-a-service or for-performance payment
model.
7
Source: Company websites.Success as a purveyor of hybrid product- Daimler AG is pursuing another approach preference for a product. But services are
services will not come easily. Companies to increase value for customers: a flexible, also an entry point for competitors to get
must compete and collaborate with players convenient pay-per-use model for city between your company and its customers.
from different industries, all attempting dwellers needing cars. Car2Go customers Think about it: A company does not have
to find a competitive edge with digital use an app to find the car that is parked to be a radiology equipment maker to offer
technology.12 To create new value and nearest to them. They open the door X-ray analysis services. And if the service
foster growth, Accenture recommends with a membership card, drive to their becomes especially valuable to customers, it
the following. destination, and simply park the car on can end up being more important than the
the street and lock it up. Car2Go competes product itself. The company that offers the
Think unconventionally about with conventional taxis, cab alternatives service can then influence product buying
customer value like Uber and hourly car rental services. decisions.
However, Car2Go differentiates itself on
Of course, selling services requires a price and convenience—both of which This is why being the most valuable
different business and operating model are key customer values. Customers information provider—the source of
from selling products. But which model? can choose to pay by the mile, the external information that customers rely on
Look for models that create value for hour or the day. The rates are lower the most to run their business—is so critical.
customers as well as your company in than for taxis, and there is no need to However, the old adage that you cannot
unconventional ways. reserve, return or order a car; the cars go it alone applies here. Finding the right
can be parked and found anywhere.14 business partners is critical to launching
Another approach is to combine high tech product-service hybrids, as few companies
to identify savings opportunities with a high Other potential models include adding have all the skills and technologies
touch approach to gaining them. Michelin optional services and features, offering necessary within their company. For
solutions built an ecosystem of experts to customization (using software and modules instance, when it comes to the agricultural
deliver its new EFFIFUEL™ service. The service to create equipment that meets specific information business, the battle to become
uses high tech and high touch to reduce customer preferences), and creating the trusted source of decision support for
fuel costs in truck fleets. Sensors inside new marketplaces.15 Take 365FarmNet, a farmers is being waged now. Companies
vehicles collect data on fuel consumption, consortium whose members include Allianz such as DuPont and Dow Chemical are
tire pressure, temperature, speed and SE, Bayer AG, and farm-equipment makers forming partnerships to develop and supply
location. This data is then transmitted to a CLAAS KGaA mbH and AMAZONEN-WERKE precision agriculture solutions to growers.
cloud service of a Michelin solutions partner, H. Dreyer GmbH. The consortium has Those alliances are challenging Monsanto
and that’s where the human touch begins. established a marketplace for agricultural Co. Recently, to bolster its FieldScripts
Michelin solutions fuel experts analyze the information where growers can buy GPS, seed-planting service, Monsanto acquired
data and make recommendations to the fleet diagnostic, crop, fertilizer and other weather information provider Climate
manager and Michelin solutions instructors data from any consortium member; Corporation and Precision Planting, which
train drivers in how to use less diesel fuel download it to their computers and farm provides tools and information to boost
when driving. Result: truck fleet managers equipment; and use it to take action, such crop yields.17
can save 2 liters of fuel for every 100 as drawing up crop plans for the coming
kilometers driven. Michelin has become more planting seasons.16 In this way, CLAAS and Share more equipment data
than a tire manufacturer—with the launch AMAZONEN-WERKE are treating their with partners
of the Michelin solutions business, it’s also a products as platforms, enabling third
fuel savings partner. parties to create information services that The product-service hybrid concept also
are used with their equipment. applies to asset owners and operators. Any
As a partner to truck fleet managers, piece of equipment becomes a productivity-
Michelin maintains a human touch with this
Be the most valuable enhancing hybrid if it generates data and
service. This product-service hybrid includes the operator puts that data to work as
driver training, and the recommendations information provider
a digital service within its supply chain.
come from Michelin experts rather than a Sell products and your customers interact However, companies are often wary of
web service. EFFIFUEL clients also have the with you only when they want to fix or sharing information about their operations
option of paying for tires on a per-kilometer- prevent problems. Sell services and you gain with their closest partners, even if it
driven basis—an example of selling a product multiple opportunities to create customer hurts productivity. Of course, executives
as a service.13 This innovative service is a touch points, build trust and establish need to be careful about how they share
prime example of thinking differently about customer loyalty. For manufacturers, valuable information. But the IIoT can give
revenue opportunities. information services can increase customer companies much greater control over their
supply chain and their processes than ever
8before. Take the oil industry: oil exploration alternative for releasing innovative speaking with clients about their industrial
and production companies rarely share products: they can experiment with cooling needs, executives identified an even
drilling plans and detailed operational data developing and offering new services. By larger opportunity: providing continuous
with oil field service companies. This slows doing so, they can see how customers temperature monitoring services for
down production by delaying the movement use information-based features and gain produce during transport.19
of equipment onto drilling sites. But if insights into their needs. And as enterprises
oil producers share planning, forecasting, start offering cloud-based IIoT services, they Whether disrupting their industry with
equipment health, field service and work can quickly test features to uncover the new business models, R&D or information
schedules, they can dramatically increase capabilities customers find most valuable services, most companies will need outside
production. The rising tide of data can float and continue to offer the ones customers partners to create and market breakthrough
all boats. like best. Over time, as companies better product-service hybrids. Few companies
understand customers’ needs, they can will have all the business skills required
Treat services as R&D for use what they have learned from selling to launch them, since these skills are not
part of their current core business model.
products services to build a well-targeted generation
The precision agriculture alliances and
of products designed for the IIoT.
Which new features will asset owners Accenture’s IIoT joint ventures—including
and operators want? What will industrial Some companies are taking their first steps the Taleris aircraft fleet optimization
products do in the future, and what on this path to innovation. Ford Motor partnership with General Electric (see “Case
will they look like? Only time will reveal Company has adopted a crowdsourcing study: Taleris”) and the Omnetric smart grid
answers to these questions. This presents approach: its OpenXC open software joint venture with Siemens—are examples
challenges for some industrial sectors. For and hardware development platform of alliances between companies with
instance, heavy equipment makers risk enables anyone to create experimental complementary knowledge and experience
offering new products before the market applications and accessories such as a that are using their combined strengths
is ready to accept them, because such nighttime collision warning application.18 to launch new services and attract new
products have relatively small customer Such exploration can also point the way customers.
bases and take years to wear out and to new business opportunities. The climate
justify replacing—unlike short-lived, technology unit of an industrial equipment
inexpensive consumer technology. manufacturer is another case in point. The
unit’s management discovered that sensors
As many large technology companies in its refrigeration compressors provided
have found, providers of product-service a stream of potentially useful data. After
hybrids now have a faster and less costly
Case study: Taleris
Delays and cancellations cost commercial passenger and cargo Taleris uses sensors to monitor aircraft parts, components
airlines in the US over $11 billion a year in maintenance costs, and systems “from tip to tail.” It employs analytics to identify
crew wages, logistical costs and lost customers.45 Taleris, a joint anomalies in engineering systems and their overall health, to
venture between Accenture and GE Aviation that was founded in analyze the root cause of anomalies, and to determine when
2012, cannot change the weather that often causes those delays units need replacement or repair. By knowing when maintenance
and cancellations. But it can eliminate avoidable maintenance is needed across a fleet, Taleris turns unscheduled maintenance
costs, increase aircraft availability and minimize disruptions before and periodic maintenance into optimally scheduled maintenance.
they occur. Airlines can schedule the best time and location for maintenance,
as well as arrange for aircraft to cover routes for any that are
Taleris, which has more than 30 airline clients around the world, grounded. The service thus minimizes the disruption and cost of
is an intelligent airline fleet optimization service. The service maintenance work by reducing aircraft downtime, streamlining
diagnoses and predicts aircraft maintenance issues before they spare-parts logistics, and arranging for backup aircraft and crew.
occur, whether or not the equipment was manufactured by GE.
The service combines GE’s advanced prognostics technologies, When service is disrupted owing to weather or other issues, Taleris
developed over 20 years in military and civil applications, with is designed to bring the best economic outcome. It considers cost
Accenture’s planning optimization and recovery technologies. drivers such as fuel costs as well as factors of crew availability and
passenger inconvenience.46
9Exploit intelligent technologies to fuel
breakthrough innovations
Innovation is critical to developing and By deploying these capabilities, companies separate worlds of information technology
delivering differentiated new product- can weave together previously unavailable, (IT) and operational technology (OT). (See
service hybrids that drive growth. To reap or inaccessible, enterprise and machine- “Connecting IT and OT.”) Today’s patchwork
the full benefits of the IIoT, companies will generated data to create new monetization of separately evolved, vendor-specific and
need to excel at exploiting three technology opportunities. proprietary infrastructure will be replaced,
capabilities: sensor-driven computing, over time, with interoperable platforms.
industrial analytics and intelligent machine Sensors, analytics and intelligent machine This patchwork creates a hurdle today, so
applications. (See Figure 2.) applications, and the in-house or third- it will be necessary to modernize and bring
party-sourced IIoT platform that will bind together both operational and information
them together, will supplant the now technology in support of a new generation
of intelligent equipment in the future.
Figure 2: Three Industrial Internet of Things capabilities to master
Information Technology
Intelligent Machine Operational Efficiency
Applications
Security,
New Services and
Governance Convergence
Industrial Analytics Pricing Options
and
Operations
Sensor-Driven Unconventional Growth
Computing
Operations Technology
Will your products be intelligent by 2020?
It is hard enough defining human intelligence, let alone agreeing In the near future, intelligent products will:
on what makes a physical product intelligent. In the 1970s, bar
codes were state-of-the-art when it came to product intelligence. • Initiate tasks and communicate with other equipment.
Today, machine intelligence derives from a large array of sensors • Tailor their user interfaces, recommendations and
and real-time decision-making software. Luxury cars are loaded movements to meet customer preferences.
with as many as a hundred microprocessor-based electronic • Strengthen their features—and thus the benefits they
control units and around 100 million lines of software. Yet we are provide customers—through software improvements.
still just beginning the journey.44
• Learn how to lower their operating costs.
• Optimize their yield and productivity.
• Prevent accidents and failures during operation.
10 • Take action in uncertain or adverse conditions.Sensor-driven computing to dealers, enabling them to anticipate set their preferences and understand
problems, proactively schedule maintenance and manage their energy consumption.
Sensors give objects the power of and help customers manage their fleets more If these intelligent thermostats are
perception—into conditions such as efficiently.26 Caterpillar says its dealers in total integrated with electric utilities through
temperature, pressure, voltage, motion, can capture anywhere from $9 billion to $18 demand-response applications by the
chemistry and usage. Sensor-driven computing billion in revenue each year should they move likes of C3 Energy or Opower, utilities
converts perception into insights (using the customers from “fix when fail” to predictive can create incentives for consumers to
industrial analytics described below) that maintenance along with other actions. reduce consumption during peak hours.
operators and systems can act on. As with Caterpillar benefits by lowering its warranty This will help maintain the stability
most technology advancements, sensors fulfillment costs and boosting sales of new of the electric grid while encouraging
are swiftly becoming smaller, cheaper and machines as well as parts and services.27 consumption at times of low demand.29
more sophisticated. In fact, Spansion Inc.
has begun making sensors that do not Healthcare companies are also finding Applications can also serve as the media for
use batteries.20 These characteristics make opportunities to offer analytics services. machine-to-machine interactions. Volvo’s
sensors an exponential technology, promising Take Virtual Radiologic Corp. (vRad), a CareTrack, for example, generates reports
repeated doublings in improvement in price tele-radiology services company. vRad has that help fleet managers track wear and
and performance over short intervals of time.21 collected data from more than 22 million tear on the vehicles.30
For example, in 2007 the average cost of an X-ray, MRI and tomography readings and
patient studies. Now it has launched an And consider SAP’s pilot with BMW’s
accelerometer sensor was $3; in 2014, the
analytics service that benchmarks radiology connected vehicles. SAP sees cars as conduits
average is 54 cents.22 By 2020, component
equipment utilization and results. for information services. Cars can receive
costs will have come down to the point that
offers from merchants as they drive nearby
connectivity will become a standard feature,
Besides improving staff scheduling, or receive information about available
even for processors costing less than $1.23
providers can discover whether radiologists parking spots.31 Taking the connected vehicles
In addition, new ways to collect sensor are over- or under-utilizing advanced concept further, we envision a scenario where
data, low-power devices and algorithms imaging equipment. They can then shift drivers will no longer pay at the gas pumps
that interpret raw signals are opening up the use of expensive MRI equipment to and gasoline retailers will no longer have to
product innovation. ZF Friedrichshafen AG’s situations where it is likely to result in pay credit card fees. The gas pump would
TraXon PreVision GPS product, for instance, positive, and therefore revenue-producing, recognize the car and know how many liters
extends the life of truck transmissions diagnoses.28 vRad is an example of the or gallons of gas were put in the tank. At the
and reduces fuel consumption. It collects kind of information service that product end of the month, the consumer would get a
data about drivers’ behavior, adds manufacturers may want to offer on their bill from the gasoline retailer.
topographical data to its analysis and own or through a partner.
Furthermore, scenarios like these need not
“tells” a vehicle’s transmission computers
when to shift gears.24 Intelligent machine be limited to equipment; anything can be
made into an intelligent machine. Roads
applications can be embedded with sensors that gather
Industrial analytics
Soon, manufacturers will no longer build data on traffic and with materials that
Industrial analytics turns data from sensors machines that have only mechanical recharge electric vehicles while being driven.
and other sources into actionable insights. functions—they will now include Recognizing the latter opportunity, Qualcomm
For example, GE’s latest locomotive has intelligence. The applications that come has begun licensing an electric vehicle
250 sensors that measure 150,000 data with machines will be the vehicle for recharging product to automakers for testing.32
points per minute.25 The end user—whether generating new revenue streams out
As these examples show, connected products
it is a machine enmeshed in a process or of these product-service hybrids. And
and software offer exciting new prospects
an individual—can use these analytics to technology advances are making it easier
for industrial companies. And technology
interpret the massive streams of incoming to integrate physical devices and their
advances are making it easier to integrate
data from the locomotive’s sensors, along accompanying software with third-
physical devices and their accompanying
with information and operational systems, party services. For example, product and
software with third-party services. For
to drive real-time decision making and to application lifecycle management tools, by
example, new product lifecycle management
anticipate events. addressing integration issues and ensuring
tools address integration issues, ensure
cross-domain collaboration, help developers
In another example, Caterpillar has started cross-domain R&D collaboration and allow
build innovative applications.
using industrial analytics to help its dealers developers to build innovative applications.33
succeed. The company harnesses and Take connected products like the Nest
analyzes data from its machines, engines and thermostat, which ships with a user-
services and transmits the resulting insights friendly interface that lets consumers
11Paths to the Industrial For now, the capabilities of the first IIoT Several consortia of technology and
platforms are anchored in the three industrial companies have emerged,
Internet of Things platforms
technology families discussed above: jockeying to set the standards for
Reaping optimal value from intelligent interoperability and ecosystem participation.
• Sensor-driven Computing: OSIsoft The IIoT Consortium (IIC) is working on
technologies requires a robust technical
provides real-time data management connecting and integrating machines with
architecture and infrastructure. IIoT
for manufacturers, utilities and mining. people, processes and data via a common
platforms will be critical to the success
The company is building a platform for architecture and interoperable mindset. The
of manufacturers and service providers.
collecting sensor data and controlling Open Interconnect Consortia and the AllSeen
These companies need the IIoT platforms
processes to help customers improve Alliance are two recently launched open
to develop product-service hybrids, enable
yield, conserve energy or resolve batch source Internet of Things consortia.37
the development of applications by third
production issues.34
parties, provide APIs for sharing data
IIoT platforms are still in the early stages of
and control the channel for delivering • Industrial Analytics: GE Software offers maturity. Executives will have to carefully
services to their customers. Asset owners its own IIoT platform called Predix for choose and manage their platforms, explore
and operators will use these platforms to its lucrative predictive maintenance the technical challenges, expect gaps in
operate equipment and applications, to business. The platform provides information sharing and interoperability,
deliver and analyze data, to link and control industrial analytics to help customers and work with their company’s closest
processes, and to connect with other avoid equipment downtime, optimize partners to bridge them.
companies in their ecosystems. profits and manage risks.35
At this time, IIoT platforms are still • Intelligent Machine Applications:
emerging, and none has achieved PTC, with its acquisition of ThingWorx
dominance in an industry sector. Open and Axeda, has built its IIoT platform
architecture advocates are just starting to to rapidly develop and run innovative
develop shared, nonproprietary platforms applications for connected products.36
and approaches. It’s also possible that
asset owners and operators will not only be
consumers of platforms but will also seek to
operate platforms of their own making.
12Fostering confidence in the Industrial Internet of Things
What can possibly go wrong when manufacturing • Identify and inventory the vast number of sensors, devices and
plants, equipment or remote facilities are equipment that are on the network. (An electric utility grid
interconnected and online? might have millions of devices and sensors.)
Plenty—including disruptions to operations, sabotage and loss • Detect and remediate counterfeit or compromised software
of life from broken infrastructure, cyber attacks and data theft and hardware.
by criminals, foreign governments and disgruntled employees.
• Safeguard the integrity of information and systems so that
Recently, an oil rig’s control systems were reportedly hacked when
unauthorized access is detected and data that falls into
saboteurs were able to tilt the rig’s platform, while another rig
the wrong hands is not corrupted and reintroduced into
became so riddled with computer malware that it took weeks for
critical processes.
the operator to make it seaworthy again.47
• Control and monitor network connections to ensure that only
Given these security threats and other considerations (see Figure
appropriate ones exist between sensitive industrial equipment.
3), it is clear that the IIoT must be underpinned by a well-thought-
out cyber-physical security architecture. Executives can support • Build in fail-safe mechanisms to make sure that compromised
this goal by augmenting their current risk management practices IT systems that run industrial-control systems cause no physical
with the following actions: harm to people and property or other severe consequences.
• Apply noninvasive techniques to patch remote assets, and use • Understand adversaries’ motivations, and adapt risk mitigation
industrial control and automation systems that cannot be easily strategies to the main danger, such as one-time theft of records,
shut down. sabotage or ongoing espionage.
• Manage obsolete and legacy operating systems, hosts and
devices that have limited or no security built into them.
Figure 3: Challenges to the defense and resilience of the Industrial Internet of Things
Companies, policy makers, customers and other stakeholders will have to work together to mitigate the risks of intelligent equipment
connected to networks.
Organization Structure
Human Health and Safety
Regulatory Compliance
Long Lifecycle of Systems
Industrial Internet of
Lack of Documentation Things Security Issues
Outdated or Nonexistent Policy
and Considerations and Access Management
Vendor Lock-in
Need for Continuous Operation
System Change Request Lag Time
13Transform the workforce for IIoT
The IIoT will open up new workforce We foresee other kinds of jobs surfacing At Rio Tinto’s operations center in Perth,
needs as it creates redundancy in others. in the UAV industry as well. Companies Australia, skilled equipment operators sit in
Yes, it will computerize certain tasks and that need UAVs to inspect pipelines and a remote command center and work with
workflow, in particular, repetitive jobs facilities will most likely wish to outsource data analysts and engineers to orchestrate
that have so far resisted automation. To these tasks to service providers. Those the actions of huge drills, excavators,
capture the bigger opportunities presented companies will need people who can design earth movers and dump trucks. Operators
by the IIoT, companies will especially need how the UAVs will operate and develop share common screen views of the mine
to look for skills in data science, software the applications that control, monitor and and its environs and carry out their work
development, hardware engineering, inventory the equipment; technicians to in response to changing conditions like
testing, operations, marketing and sales. ensure connectivity between UAVs and the weather, truck breakdowns or major
Moreover, they will need this expanded network and to integrate drone data into equipment moves. Analysts, using data
talent base to handle three critical the company’s systems; and dispatchers generated by sensing equipment in mines
activities: and field service agents to repair or replace around the world, make recommendations
parts or to investigate when a UAV spots to operators in the center about how to
Creating the new broken equipment or intruders. perform their jobs. The center has already
Industrial Internet of demonstrated impressive results: increased
Things service sector Supporting users of industrial efficiency and reliability, decreased
products and services variability, and better identification of
Offering product-service hybrids will performance issues.42
require a workforce to create, support and Companies offering IIoT tools will strive to
make them convenient and simple to use. Advances in robot technology will further
sell them. Such employees will include
Think of advances in wearable technology change how people do their work. Today’s
product managers, software developers
such as Google Glass and user interfaces as robots are generally used to perform
to create and test new information
found in Metaio GmbH’s augmented reality hazardous, highly repetitive and unpleasant
services, hardware designers to develop
software, which combines mobility and tasks. Many robots will continue serving in
the products, data scientists to create and
industrial information.41 But there will be these ways. However, a new breed of robots
interpret analytics, and user interface and
times when putting intelligent equipment is being designed to team up with people
experience designers.38 Downstream, sales
and services to work requires technical and work safely with them. For example, a
managers and marketers will be needed to
know-how. Companies will need process robot could modulate its physical behavior
position and sell the new offerings, within
engineers to integrate these services to avoid causing injuries or learn tasks
product and service providers and across
sales channels. Take Predix, GE Software’s into their operations and to find ways to without the need for programming. The ABB
platform for the IIoT. As of this writing, improve worker and customer productivity. Dual Arm concept robot (formerly known
Data science and quantitative analysis skills as FRIDA, for “Friendly Robot for Industrial
GE Software has openings for software,
will also be critical for those working with Dual-Arm”) can learn a worker’s preferred
hardware and analytics engineers; test and
incoming data. way to carry out a certain task and then
documentation, cloud, and infrastructure
adapt its movements to help complete the
engineers; mobile software developers and
software architects; software and services Mastering new ways task in that way. Rethink Robotics’ Baxter
of working not only interacts with humans but also
support; product training; and talent
learns from them. If Baxter is shown a step
acquisition.39 New categories of services
Users of the IIoT products and services will in a specific task, the robot can figure out
will emerge because of the IIoT. Skycatch,
not only find new work to do; they will also how to perform the remaining steps in
a manufacturer of unmanned aerial
have to do work differently. Think about the task. These robots are well suited to
vehicles (UAVs), currently has openings
equipment operators: their jobs take on working with people, doing basic, repetitive
for embedded software engineers, mobile
more sophistication and skill when they tasks supervised by workers.43
engineers with Apple iOS skills and field
move from driving equipment in the field to
operations engineers.40
operating UAVs and robotic equipment from
a hub and service center.
14Connecting IT and OT
The Industrial Internet of Things brings together two separate These worlds will become one. However, the merger will take
technology families: time because the technologies are owned by different business
functions, operate under different technical standards and are
1. Enterprise IT for resource planning, customer relationship served by different vendors.
management and decision support systems.
2. Operations technology that monitors and controls field
equipment, manufacturing and production processes.
Today’s realities Tomorrow’s vision
Software, sensors and controls running today’s Sensors, communications and other operational
facilities and equipment are outdated and difficult to technologies are working together with
upgrade. Companies cannot readily incorporate new information technologies, most likely meshing in
features and improvements. the cloud.
Limited integration between internal systems Standard, fast software development techniques
(managerial apps, plant data sources) and external are used to create intelligent industrial products.
partners creates data silos.
A common data model and sensing and control
Aging operating systems and vulnerable operational architecture that supports the flow of insights
technologies pose security risks because they cannot and action throughout an organization and its
be easily retired or replaced. ecosystem of partners.
Limited embedded computing or intelligence control The IIoT infrastructure is trustworthy and resilient
at the device, product or plant level. to inevitable compromise.
15Seven steps for moving forward
Offering product-service hybrids, exploiting intelligent technologies and transforming the
workforce will require up-front preparation. Executives can get ready by taking these steps:
1 Think boldly about value.
Begin piloting a variety of new services
3 Start now to design and
develop your platform.
that benefit key stakeholders: customers,
original equipment manufacturers (OEMs) Investigate the pros and cons of new
and dealers. Ask, “What product-service technologies. Develop the architecture
hybrids beyond remote monitoring and and frameworks that will accommodate
predictive asset maintenance resonate sensor networks, industrial analytics
with our customers and our customers’ and an ecosystem of intelligent machine
customers? What product, service and applications. Ask, “How will the
value can we deliver to clients? How architecture be designed: open or closed
prepared are we to accelerate our move to outside developers, customers and third
toward a services-and-solutions business parties such as telecommunications firms
model? How do we develop and add the and solution providers? What Industrial
talent we need to be successful?” 2 Think about tomorrow’s Internet platform will help us deliver and
partner ecosystem. successfully operate these new services
across multiple channels?”
Companies will work with partners and
suppliers to create and deliver services as
well as reach potential new customers.
Think of the partnering taking place
between farm equipment, fertilizer
and seed companies, weather services,
and the suppliers needed to provide IT,
telecom, sensors, analytics, and other
products and services. Ask, “Which
companies are also trying to reach my
customers and my customers’ customers?
What other products and services will
talk to ours, and who will make, operate
and service them? What capabilities
and information does my company have
that they need? How can we use this
ecosystem to extend the reach and scope
of our products and services through the
Industrial Internet of Things?”
165 Sell your sales channel
on promoting new
digital products and
services.
Assess whether your company’s sales or
dealer network has the right incentives and
training to support your growth strategy.
Ask, “How can we convince our dealers that
4 Closely study the they will benefit from selling services as well
financials. as products? Where might channel conflict
erupt when services can be sold directly
Consider all the financial angles in advance. online, and how should we manage such
Ask, “What financial models should we use conflict?” Your marketing and your customer
to evaluate return on investment? How
do we manage the costs of transitioning
support and service operations need to be
prepared for the sales push as well. 6 Clarify legal rights,
from a product to a product-service mix? obligations and secure
How will different adoption scenarios access to information
affect our costs, pricing and margins? What about your installed
revenues will be cannibalized as we move base.
to services?”
Consider what data governance and
protections you must establish to deliver
new digital services. Ask, “Who has
7 Put people at the permission to use data generated by a
given piece of machinery—our company
center of executing
or the owner of the equipment? How can
your strategy. we persuade owners to give us access?
Think about how to augment your How do local laws affect what data is
workforce with smart machines. Ask, “How considered sensitive or protected in different
can we provide data so that experts and countries where we operate?” See “Fostering
nonexperts alike can easily work with it? confidence in the Industrial Internet of
How can we raise worker productivity and Things” (Page 13).
empower people with the new Industrial
Internet of Things’ technologies? What are
the skills that are needed to run innovative
businesses, and with whom do we partner
to obtain that talent?”
The Industrial Internet of Things is bringing new growth opportunities to companies that prepare
themselves now. It is still early; there are technology challenges and important hurdles to
overcome, particularly in connectivity and security. Not all products can or need to be connected
and intelligent right away. But amid the new, an old truth remains: business customers need
products and services that create more value for them than those on offer today. The emerging
Industrial Internet will unleash new energy into the world of industrial products and services. To
be a viable stakeholder as well as partner in the digitally contestable future—and thus generate
new revenues—companies will need to make the necessary changes. The time to push is now.
17Biographies
Paul Daugherty is Accenture’s chief
technology officer and also leads Accenture’s
Technology Innovation & Ecosystem groups.
He is based in New York City.
Email paul.r.daugherty@accenture.com
Follow him on Twitter: @pauldaugh.
Prith Banerjee is the managing director
of Global Technology Research &
Development at Accenture. He is based in
San Francisco.
Email prithviraj.banerjee@accenture.com
Follow him on Twitter: @prithbanerjee.
Walid Negm is a global R&D director with
Accenture Technology Labs and leads
Accenture’s Industrial Internet Strategic
Innovation Initiative. He is based in
Arlington, Virginia.
Email walid.negm@accenture.com
Follow him on Twitter: @walidnegm.
Allan E. Alter is a senior research fellow
at the Accenture Institute for High
Performance. He is based in Boston.
Email allan.e.alter@accenture.com
Follow him on Twitter: @allanealter.
Acknowledgments
The authors wish to thank the following
for their contributions: Edy Liongosari,
Dev Shyam and Dadong Wan of Accenture
Technology Labs; Jeanne G. Harris, David
Light and Vikram Dalal of the Accenture
Institute for High Performance; Laurie
A. Henneborn and Karen E. Swanson of
Accenture Research; Mark P. McDonald of
Accenture Strategy; Frank Riemensperger of
Accenture Germany; Eric Schaeffer, Ralf Russ
and Juha Turunen of Accenture Products;
and Omar Abbosh and Michael Grady of
Accenture Resources.
18Notes
1. Copyright Oxford Economics Ltd. Global Industry
Databank, accessed on June 12 2014. https://www. 25. Daniel Terdiman, “How GE got on track toward the
oxfordeconomics.com/forecasts-and-models/industries/ smartest locomotives ever,” CNet.com, June 21, 2014.
data-and-forecasts/global-industry-databank/overview. 26. Wayne Grayson, “Caterpillar pushes dealers missing
2. David Floyer, “Defining and Sizing the Industrial out on billions in sales each year to increase use of
Internet,” Wikibon, June 27, 2013; Peter C. Evans and telematics data,” Equipment World, May 21, 2014.
Marco Annunziata, “General Electric: Industrial Internet, 27. G. C. Skipper, “Predictive maintenance and condition-
Pushing the Boundaries of Minds and Machines,” based monitoring,” ConstructionEquipment.com, February
November 2012. 22, 2013.
3. “Industry 4.0: Huge potential for value creation waiting 28. vRad.com future of radiology microsite.
to be tapped,” Deutsche Bank Research, May 23, 2014.
29. Opower website; “Demand Response Programs Will
4. G. P. Sullivan, R. Pugh, A. P. Melendez and W. D. Hunt, Reach Nearly $10 Billion in Annual Revenue by 2023,”
“Operations & Maintenance Best Practices: A Guide to Navigant Research, June 5, 2014.
Achieving Operational Efficiency, Release 3.0,” Pacific
Northwest National Laboratory, U.S. Department of Energy, 30. Volvo Construction Equipment website, www.volvoce.
August 2010. com.
5. Press release, “Accenture to Help Thames Water Prove 31. Chris Kanaracus, “SAP, BMW Research Project Will
the Benefits of Smart Monitoring Capabilities,” March 6, Connect Drivers with Real-time Offers and Services,”
2014. PCWorld, February 26, 2014; BMW Group Research and
Technology Testimonial (English), www.sap-customers.
6. Scott MacDonald and Whitney Rockley, “The Industrial com.
Internet of Things,” McRock Capital.
32. Michael Belfiore, “We Could Build a Solar-Powered
7. James Wilson, “Miners tap into rich seam of `internet of Roadway. But Will We?,” PopularMechanics.com, June 11,
things,’” Financial Times, July 16, 2014. 2014.
8. Apple iOS 8 Preview, health; Clint Boulton, “Apple’s New 33. Patrick Waurzyniak, “Connecting the Digital World
Health Focus Comes at Propitious Time,” The Wall Street with the Factory Floor,” Manufacturing Media Engineering,
Journal. CIO Journal, June 10, 2014. April 1, 2014.
9. 2014 Accenture Technology Vision. 34. “Chemicals and Petrochemicals.” OSIsoft website,
10. Accenture, “Remaking customer markets: Unlocking osisoft.com.
growth with digital,” 2013. 35. “Predix.” GE Software website.
11. Rajan Varadarajan, Manjit S. Yadav and Venkatesh 36. “ThingWorx.” PTC website, PTC.com.
Shankar, “First-mover advantage in an Internet-enabled
market environment: conceptual framework and 37. Don Clark, “New Tech Group Joins Crowded Field to
propositions,” Journal of the Academy of Marketing Set Rules for ‘Internet of Things,’” The Wall Street Journal,
Science (2008) 36:293–308; Fernando Suarez and Gianvito July 8, 2014; Quentin Hardy, “Intel, Qualcomm and Others
Lanzolla, “The Half-Truth of First-Mover Advantage,” Compete for ‘Internet of Things’ Standard,” The New York
Harvard Business Review, April 2005. Times Bits Blog, July 8, 2014.
12. Accenture, “Remaking customer markets: Unlocking 38. Accenture analysis of Industrial Internet job openings
growth with digital,” 2013. on June 12, 2014.
13. Michelin solutions press release, July 11, 2013; 39. GE.jobs.com, June 12, 2014.
Dipti Kumar, “Step on the Pedal of Cloud Services,” 40. Jobs at Skycatch, https://angel.co/skycatch/jobs, June
CruxialCIO.com, September 17, 2013. 12, 2014.
14. Daimler Car2go website. 41. Metaio website.
15. “ERP Services & IoT Implications,” Pierre Audoin 42. Robert H. Thomas, Alex Kass and Ladan Davarzani,
Consultants, May 2014. “From looking digital to being digital: The impact of
16. 365FarmNet.com. technology on the future of work,” Accenture 2014.
Accenture did not participate in the creation of the Perth
17. Jacob Bunge, “Big Data Comes to the Farm, Sowing operations center and is not involved in running the
Mistrust: Seed Makers Barrel Into Technology Business,” center.
The Wall Street Journal, February 25, 2014.
43. Robert J. Thomas, Alex Kass and Ladan Davarzani, “Fast
18. Presentation by Venkatesh Prasad and Ford Motor and furious: How digital technologies are changing the
Company exhibit at O’Reilly Solid Conference, May 21-22, way we work,” Accenture Outlook Journal, 2013, No. 3.
2014. OpenXC night vision project page, Ford OpenXC
platform website. 44. Robert N. Charette, “This Car Runs on Code,” IEEE
Spectrum, February 1, 2009.
19. “Manufacturing Transformation: Achieving competitive
advantage in a changing global marketplace,” Oxford 45. Accenture Institute of High Performance research
Economics, June 10, 2013. using data and statistics from the Federal Aviation
Administration and the Bureau of Transportation Statistics
20. Dean Takahashi, “Spansion goes battery-less with tiny of the U.S. Department of Transportation, the U.S. Bureau
‘Internet of things’ chips,” Venturebeat.com, June 5, 2014. of Labor Statistics and Airlines for America (formerly
21. Larry Downes and Paul Nunes, “Big Bang Disruption: known as the Air Transport Association of America, Inc.).
Strategy in the Age of Devastating Innovation,” Penguin 46. Taleris website, “Etihad Airways and Taleris Implement
Group US. Kindle Edition. New Technology to Predict Aircraft Maintenance Faults,
22. James Carbone, ”Expect Sensor Prices to Fall,” Digikey. Reduce Flight Delays,” BusinessWire, June 18, 2013;
com, December 18, 2013; Paula Doe, “Sharply Falling “Brains for Planes: Etihad Taps Big Data to Keep Planes on
MEMS Prices Spur Rising Demand,” Semi.org, July 6, 2010. Time,” GE Reports, June 18, 2013.
23. Gartner, “Gartner Says the Internet of Things Installed 47. The World Economic Forum report “Global Risks 2014;”
Base Will Grow to 26 Billion Units By 2020,” December Jeremy Wagstaff, “All at sea: global shipping fleet exposed
12, 2013. to hacking threat,” April 23, 2014.
24. ZF Friedrichshafen AG, “TraXon – The New, Modular
Transmission,” www.ZF.com; “ZF’s new modular TraXon
Truck Transmission leads innovation,” Primemovermag.
com.au, August 15, 2012.
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