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Risky Business

Playing to Win at IIoT

In the “game” of the Internet of Things, you could think of installing sensors as getting to first base, and a successful and profitable IIoT system as making it home. In between are the important steps of enacting a business model and mitigating risk. In our latest episode of Future Perfect Tech, we sit down with Guneet Bedi, Senior VP and General Manager for the Americas at relayr, to discuss the pieces that must be in place to win at Industrial IoT.

IIOT FINALLY TAKES THE FIELD

This is a story about the Industrial Internet of Things (IIoT), but it’s not a story about technology per se. The basic tech—think of it as the pipes or plumbing—of the IIoT 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 in America and 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?

Smart Systems and Services Evolution (medium)

Source: Harbor Research, Inc.

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 and 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.

But 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.

STEALING THIRD BASE

In thinking about how to introduce relayr, the precocious firm that calls itself “the IIoT powerhouse delivering risk-free digital transformations,” the term “digital maturity” comes to mind. After all, 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, as relayr has, that’s second base. At that stage, the 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 consumer is just as important as delivering it to the provider. But oftentimes, second base is as far as the IIoT story goes.

Smart Systems and Services Journey (medium)

Source: Harbor Research, Inc.

SHARING RISK

Relayr is an important exception to this rule. The upstart company is now in the process of stealing third by adding the business model component of “shared risk,” thus creating even more value for the customer.

“ROI looks really good on Excel sheets and paper, and then you hit reality, trying to get your first few assets onboarded, and it can look pretty different,” says Guneet Bedi, Senior VP and General Manager for the Americas at relayr. “We’re just trying to align with our partners and customers and say, ‘We will make money if you make money.’”

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. The typical business thinking remains overly self-interested and not customer-centric. Businesses want to protect IP and do things in secret.

By contrast, relayr offers its partners numerous new possibilities through its parent company Munich Re, which is one of the world’s largest reinsurers. 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. Relayr 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, ecosystems and collaboration will be added to the business model and then we’ll see a general rush to third base.

When that happens, the competition will find that relayr is already there. In the meantime, listen to our podcast with relayr’s Guneet Bedi. It makes clear what the possibilities of advanced technology can be when matched with equally sophisticated business thinking. We hope you enjoy it.


This essay is supported by our Growth Insight “Creative Software Evolution: Software Growth Strategies and Models.”

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