The Industrial Internet of Things (IIoT) has the potential to transform asset performance in a number of industries. According to a recent study from the Genpact Research Institute, almost 81 percent of organizations believe successful adoption of IIoT is critical to future success. But at the same time, only 25 percent believe they have a clear IIoT strategy – and of those, only 24 percent are happy with its execution.
The research underscores that most companies get the “why” of the IIoT, though they remain unclear about the “what” and the “how.” Recent technological advances have fueled a lot of excitement around the game-changing potential of the industrial Internet, but few organizations have an understanding of practical use cases, and many of them struggle with the scalability of their initiatives.
The study shows that manufacturers are beginning to bridge the chasm between early IIoT adopters and market majority. Global enterprises are allocating resources in ever-increasing amounts to adopt the technologies of IIoT. Half report that they have used IIoT sensors and related technology for at least a year. By the end of 2016, two thirds of manufacturers said they expect to use IIoT technology. Over half (54 percent) of manufacturing companies report that they have budgeted for IIoT capital investments and more than half of them have also increased their investments over the previous budget cycle. However, a large majority of respondents remain indecisive, with stagnant or no investments.
Leaders Have a Clear Strategy
The Genpact research also examined what differentiates the leaders (the top 25 percent of respondents whose IIoT strategy is ahead of competitors) from everyone else (the strivers). More than half of leaders (56 percent) have a clear strategy, compared to only 14 percent of strivers, and leaders are three times more likely to rank execution of their strategy as excellent.
While the majority of all respondents (77 percent) see the ability to spur growth as the top opportunity from an effective IIoT implementation, the proportion is much higher for leaders, at 90 percent. Similarly, while 69 percent of strivers see increased agility as an objective, 85 percent of the leaders consider it important. The gap closes when it comes to cost reduction, as leaders and strivers agree, with 76 percent and 69 percent, respectively, citing it as key priority.
While the leaders clearly have a more holistic view of the impact that IIoT can deliver and also seem to be on track to realize the benefits, many manufacturing executives remain unclear about how to adopt IIoT technology and which challenges need to be tackled first.
Data Security and Privacy
Data security and privacy (cited as problematic by 37 percent and 33 percent of respondents, respectively), insufficient skills of technology staff (35 percent), use of legacy systems (34 percent), and data quality (34 percent) are the top concerns of manufacturing enterprises. Leading adopters of IIoT are concerned with the ongoing challenges of managing and utilizing data. For example, more than half of leaders point to data security as potentially problematic, and to the concerns regarding privacy and confidentiality.
As billions more devices come online and data storage moves into the cloud, the risk of cyberattacks is bound to increase without more effective countermeasures. Manufacturing leaders are well aware of these risks. Half of survey respondents believe IIoT technology is increasing the probability of cyberattacks on their organizations. In response to these threats, a similar percentage (48 percent) has developed cyberattack response plans, which seems encouraging until you consider that this leaves a majority of firms without such plans. Half of leaders believe interconnectivity helps proactively manage risk of cyberattacks, compared with only a third of strivers.
It comes as no surprise that leaders can expect a greater financial impact from IIoT initiatives than those moving more slowly. But the projected gap between the two groups is glaring. Leading firms anticipate an average annual positive impact of $526 million through their use of digital technologies alone. Compare that figure to the $126 million projected by the strivers. Similar chasms exist in terms of the impact from IIoT-specific process redesign ($530 million versus $88 million) and advanced organizational models that leverage IIoT ($446 million versus $59 million).
The solution framework for determining IIoT’s “what” and “how” for a company must start with the business problems that industrial machinery organizations are trying to solve and work backward to the actions, people, and the required data. One of the unique characteristics of digital technologies like IIoT is that reaping all of the benefits requires coordination not only with value-chain partners – which can be immensely challenging on its own, but also among departments within a company.
Genpact’s research indicates that IIoT will result in significant operational improvements, but there is a remarkable divergence among what IIoT leaders and strivers believe are the additional growth levers, including business agility, new product development, and enhanced customer experience. The study shows that successful IIoT implementations will require the ability to work cross-functionally – across information technology, analytics, and business groups – to drive process transformation at the front end and across the middle and back office that supports the front end in scalable ways.
Prashant Shukla leads the initiatives of Genpact Research Institute for the manufacturing space. As an experienced consulting, product innovation, and research professional, he focuses on the study of cutting-edge technologies like the Internet of Things to solve the manufacturing industry’s biggest challenges.
Gianni Giacomelli is senior vice president of product innovation at Genpact and head of the Genpact Research Institute. In addition to being responsible for many of Genpact’s portfolio extensions leveraging technology and analytics, he was one of the main architects of the revolutionary Lean Digital approach intended to harness the power of digital technology in business operations.
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