Industrials Must Shift Gears on IIoT

Feb. 25, 2019
Now that the Industrial Internet of Things is mainstream news, it’s time for each company to decide its industrial transformation fate.

The Industrial Internet of Things (IIoT) and industrial transformation seem like yesterday’s news. Indeed, much has been written about IIoT since LNS Research first coined the term in 2014. As IIoT and industrial transformation initiatives become mainstream across the landscape of industrial companies, it’s helpful to pause and examine the most current trends in their plans, projects and outcomes around industrial transformation in general and IIoT specifically. The research and trendlines show steady growth of interest and the maturity of the markets, according to Tom Comstock, principal analyst for LNS Research.

Data points to IIoT market maturity

“When we say ‘industrial transformation,’ we mean the proactive and coordinated approach companies use to leverage digital technologies to create step-change improvement in industrial operations,” Comstock says. That’s not to say that digital transformation isn’t important. Industrial transformation is an important—and usually the largest—subset of digital transformation program efforts. “Since early 2015, there has been consistent growth of companies’ appetite for industrial transformation, and we see an ever-greater proportion of companies getting positive results.”

Industrial transformation has become a key focus of industrial organizations throughout the world. We have seen a dramatic increase in companies with an active industrial transformation or IIoT program—from 38 percent in early 2015 to 45 percent at the end of 2018. The number of companies that plan to start an industrial transformation or IIoT program is also on the rise. The only downward trend is among companies with no such plans, today only 26 percent. This holds true across every major geography, and among companies of all sizes.

In a recent global survey across operations staff, management and executives of industrial organizations, LNS Research revealed that today, 40 percent of companies that are executing or planning to execute an industrial transformation program are also investing in IIoT technologies. The data doesn’t just point to growing interest. In fact, 48 percent of companies are already getting value with IIoT, and 7 percent report significant impact for their organization.

“These numbers point to a dramatic shift. Companies aren’t just looking―industrials have done their due diligence and have started putting plans into action,” Comstock says. “In fact, we see considerably more engagement with IIoT; the number of companies reporting a considerable investment has gone up 86 percent in the last six years. Furthermore, 41 percent more companies plan to invest within the next 12 months than six years ago.”

Challenges shift as market matures

The LNS industrial transformation readiness survey data shows a marked decline in early-stage efforts associated with technology like building a business case for IIoT or understanding what it is and how it applies to the business. However, challenges don’t end as the market continues to mature around IIoT.

We see a 90 percent increase in companies citing security as a key challenge in IIoT and industrial transformation initiatives from 2017 to 2018. The most recent LNS Research survey also revealed a 100 percent increase in organizational issues around these transformational projects, in particular around culture and change management. “When companies start struggling with security, change management and culture, it tells us the deployments are maturing, the technology is becoming mainstream, and late adopters can now learn from those that bought in early,” Comstock remarks.

When we think about the nature and scope of industrial transformation and IIoT implementations, we’ll likely see scaling to thousands or millions of devices. This will also become a factor and contribute to technical challenges. Where IIoT programs are concerned, technical issues will continue to emerge, even as the mix of specific challenges continue to evolve.

Better late than never

“One challenge has remained constant over the last 6 years and probably will forever: getting funding,” Comstock says. “Budgets in operations are always tight.”

With the clear shift from emerging to maturing market, even risk-averse companies should be planning and funding their industrial transformation initiatives. Late starters have the benefit of learning from the mistakes and successes of early adopters and have the advantage of employing best practices.

We have seen the greatest success from those companies that align the program with strategic objectives and evaluate their digital readiness against published benchmarks. Ultimately, your company will have to decide what kind of story it wants to become—one of success and competitive advantage, or a non-starter lost in time.

>>Diane Murray, [email protected], is a senior marketing and research associate at LNS Research, which provides advisory and benchmarking services to help line-of-business and IT executives make critical decisions.

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