With all the buzz surrounding the Industrial Internet of Things, many businesses have started to weigh the pros and cons of adoption. It’s not an easy decision either - while IIoT systems clearly have value and utility, decision makers have to weigh that against the cost of implementation and ongoing maintenance. It’s a balancing act, and it all comes down to the same question in the end: is the system going to be profitable?
Some businesses ignore this question altogether, and take the “If it ain’t broke, don’t fix it” approach. Many businesses are already profitable, and don’t want to make any changes that could potentially carry a degree of risk. Risk-averse businesses are naturally cautious about new technology, and typically avoid adoption unless the value is undeniable.
Even more businesses look at it from a time perspective - how long will it take for the system to pay for itself? Even if a system is profitable in the long run, it might not be economical to implement in the short term.
That all brings us to the big question: “Is implementing an IIoT system really worth it to my business?”
The answer is a solid “Maybe”.
It might surprise you to hear that coming from an IIoT blog. You might have been expecting a huge, dramatic speech about how IIoT and Industry 4.0 is absolutely the future and 110% worth it in every case, followed by a sales pitch about how every business desperately needs a system to track the number of nose hairs on every employee at all times.
The reality, however, isn’t so cut and dry. The common concerns that businesses have regarding IIoT adoption are absolutely valid points. There’s a lot of different kinds of IIoT technology out there, and there’s no single, perfect solution that will fit the needs of every business.
Every business can benefit from some amount of IIoT technology. How much IIoT technology, and more importantly what kind of IIoT technology, is something that’s going to be unique to every business application. A system that’s well designed and tailored to your business needs can be incredibly valuable, but a poorly designed system that doesn’t fit your needs is just a pointless expense.
So, in this week’s article, we’re going to examine the major factors to consider when evaluating IIoT systems, and how to determine if a system is economical for your specific business needs.
Technology vs Labor
For most businesses, the first factor to consider is the tradeoff between labor and automation. Many IIoT systems are designed to help you make the most out of your workforce, by automating tasks that soak up a lot of workers’ time and attention. Some great examples of this are IIoT systems that collect real time data for supervisors, coordinate work assignments, or aid the process of troubleshooting equipment faults.
This is one of the simplest factors to evaluate - if you can estimate how much time the system is going to save your employees, it’s simply a question of translating that time into the equivalent labor expense, and comparing that to the cost of the system.
Businesses that heavily rely on large amounts of labor tend to benefit from this aspect of IIoT systems the most. Even if a system only saves your employees a few hours of time a week, it can still be extremely cost effective if you have thousands of employees.
Similarly, time saving IIoT systems can also benefit companies that rely on very expensive labor. Companies that employ lots of engineers, lawyers, doctors, or other highly paid professionals often find time saving IIoT solutions to be particularly economical. By definition, if a worker is paid more, their time is more valuable - so even if you don’t employ a very large number of people, many IIoT systems are still economical if the people you do employ are highly paid.
Much like how some IIoT technology helps you make the most of your labor force, other types of IIoT technology help you make the most out of your equipment. Predictive maintenance systems, status monitoring, and fleet tracking systems are all good examples. Transportation and manufacturing companies in particular tend to have a lot of equipment related inefficiency - high idle times, low Overall Equipment Effectiveness, and large amounts of unscheduled downtime due to equipment breakdown plague these industries more than any other field.
The right IIoT systems can have a huge impact on how effective your equipment is, which is especially important to companies that want to expand their operations without having to make massive investments in new machinery. IIoT equipment can be retrofitted to just about anything, and the cost of adding IIoT functionality to existing equipment is often miniscule compared to the cost of buying more equipment.
The amount of benefit you can expect from retrofitting IIoT equipment to existing machines is dependent on a number of factors. Generally speaking, machines with low OEE or frequent breakdowns will see the most benefit, but even machinery that works well can benefit. For example, research at Frankfurt Airport indicated that advanced fleet tracking IIoT systems were increased efficiency so much that the break-even point was estimated at a mere 3 months - in the longer term, the system is expected to save the airport an estimated €20 million, making it an extremely economical investment.
Another factor to consider is the customer experience. Some types of IIoT technology are directly customer focused, and serve primarily to help you provide better service. This can translate to more repeat business, or larger investment by clients. Other types of IIoT technology might not be directly customer focused, but still benefit the customer - for example, most quality assurance systems are completely invisible to the client, but still result in more satisfied customers.
There’s a lot of overlap between this area and all the others, since most IIoT systems can provide both internal and external benefits. Package tracking might be incredibly useful for warehouse managers, but it’s also a feature that’s strongly desired by customers who want to know the exact status of their shipment.
Even the totally transparent systems help here. Really, anything that helps a business run more smoothly will inherently result in a better customer service experience. Customers like it when their packages arrive undamaged, their manufactured goods are free of defects, and their international flights are kept on schedule.
Since this is such a nebulous topic, it’s a little harder to objectively measure than the other factors. The best way to approach this is to look at competitors and companies similar to yours, and look for areas where you might be able to improve. Again, when evaluating IIoT systems, it’s important to target your solutions to your needs - if there’s a particular area that customers tend to complain about, then that’s probably what you should focus on.
Staying Ahead of The Curve
Success isn’t just measured in terms of how much profit you can generate now - it’s important to consider how well prepared your business is for the future. The business landscape is always changing, and businesses that don’t keep up with new developments inevitably get left behind. No analysis would be complete without also taking into consideration what the competition is doing, and what customers are going to expect in the future.
The problem is that, by the time a business realizes its model is obsolete, it’s already too late. There’s no shortage of companies that failed because their business model was stuck in an older market - their strategies weren’t necessarily bad, they were just outdated. Companies like Blockbuster had business plans that worked great when people were renting VHS tapes, but fell flat as soon as customers started to demand mail delivery and streaming services.
When you’re looking at doing something new with IIoT - something that’s not possible with older technology - market research is your friend. This is one of the least predictable factors when it comes to determining if an IIoT solution will be economical - but it also holds the most profit potential. Being first to market with a new and desirable service or product is the kind of thing that leads businesses to conquer entire industries, like how Uber captured 87% of the entire ride hailing market between their inception in 2009 and the end of 2016.
IIoT systems can be incredibly economical when they’re tailored to the needs of your business. The most successful systems are the ones designed by industry experts and IIoT specialists to work with your business - not someone else’s. An expertly engineered system can be one of the most profitable investments a business can make - if it’s done right.