Building the Internet of Things: Implement New Business Models, Disrupt Competitors, and Transform Your Industry

A conversation with Maciej Kranz, VP of Cisco’s Strategic Innovations Group &
author of the new Building the Internet of Things Book

Q. What are the biggest misconceptions about IoT?
A. Two of the biggest misconceptions are: IoT is about connecting devices and, IoT is about connected home (inter-connecting devices in the home)

In fact, we see most of the applications of IoT in the business environment; however, down the road, I do expect key innovations to emerge in the consumer segment (but we are not there yet). Today, IoT is about business impacts driven by IoT solutions built around connected devices, data they generate, and applications.

kranzauthorphotoQ. What should investors know about which industries will grow most and first from IoTtransformation?
A. The good news is that adoption of IoT has been broad. According to my own observations and research houses such as Ovum or McKinsey, IoT has been mostly adopted in manufacturing, logistics, transportation but also in retail, healthcare, agriculture and even sports and entertainment.

Q. What types of companies or industries are most at risk for disruption by IoT?
A. Traditionally, in the technology industry companies need to re-invent themselves every 3-7 years to survive. If the company misses one transition, it can still recover, but if it misses two, it is usually fatal. However, IoT is now bringing the same model to other industries (just see how the car industry is transforming and how rapidly). Thus companies that stick to traditional business models, closed systems and one company providing a complete solution approaches will be the losers. The companies that adopt change as a way of doing business, that open up their offers and processes and who embrace collaborating with an ecosystem approach to develop solutions will be the winners.

Q. Why are only some businesses investing in IoT and not others?
A. As I talk with customers, they fall into three categories: some (believe it or not) have not heard about IoT, some are confused by all the technology centric or future-oriented messaging they are hearing. But, there are also 1,000s of customers who have started on the IoT journey. I believe most companies in most industries will benefit from adopting IoT today. I wrote this book to demystify IoT and help business managers to start implementing IoT and to use IoT as a catalyst for the digital transformation of their organization and business.

Q. Why is manufacturing one of the first industries to reap huge benefits from IoT and what will be the impact of this?
A. Manufacturing is all about quality, efficiency, cost, and uptime. IoT solutions enable
manufacturers to demonstrate substantial and quick benefits by applying IoT to their operations. It is a low-hanging fruit starting with connected operations to remote operations, predictive analytics and preventive maintenance. Customers from Rockwell, to Ford, PepsiCo, Harley to Cisco have shown big returns.

Q. What advice would you give to a small or midsize business leader who is just beginning to explore IoT implementation?

  • Create your big vision (where you want your organization to be in 10 years).
  • Identify first a small project (pick from one of the four fast payback scenarios I listed in the book thousands of your peers have implemented these solutions already); it will set you on the path of IoT transformation.
  • Gather stats and benchmarks in the industry and compare them to your own Total Cost of Ownership
  • Build your business case for the first project.
  • Get C-suite sponsorship this is essential, you are not embarking on one project, you starting to transform your organization.
  • Establish a partner ecosystem you will need them starting with your first project.

Q. Where will the industry be 15 years from now and how should business leaders differentiate what IoT technologies they in now vs. later?
A. The rate of change is accelerating across all major industries. The convergence of technology and new business models are disrupting old industries. Transportation or manufacturing industries and high tech industries used to operate as if on different planets. Now they are rapidly converging. For example, new technologies such as 3D printing are likely to converge manufacturing and retail. IoT is at the core of these transformations. These transformations will not be possible unless everything connects with everything. Which is why, the adoption of IoT is not an option; it is a must if you want your business to survive.

Q. Who are a few of the better-known companies that have pioneered IoT technology withpositive results?
A. Most of the fortune 1000 manufacturers such as Harley-Davidson or PepsiCo have already started implementing IoT. The same goes for the mining companies such as Rio Tinto or Gold Corp. Retailers, healthcare providers, agriculture companies, transportation companies, there are thousands of examples of companies, organizations (including NGOs that use IoT for sustainability and environmental purposes), major and medium-sized cities worldwide.

Q. How could IoT solve some of the logistics and shipping challenges presented by the crush of ecommerce business on busy Cyber Monday?
A. Logistics is about efficiency, scale and predictability. IoT helps logistics and shipping companies all the way through the process. Here are a few examples:

  • Accelerate the time from order to the factory or distribution center (connected operations)
  • Accelerate the time to fulfill the order in the warehouse (automated distribution centers,
  • RFID tags, high-speed automated packaging lines etc.)
  • Ensure that delivery trucks don’t break down during the delivery (preventive maintenance)
  • packages are delivered as scheduled
  • Customers can track their purchases through the process (connected operations)
  • Weather and traffic conditions are factored into the delivery schedules

Q. You say that there’s a fundamental disconnect between OT and IT. How do you suggest people reinvent their understanding of each moving forward?
A. To paraphrase the book Men are from Mars and Women are from Venus, traditionally IT and OT operated as if they were on different planets. Infrequently IT has been involved in plant or mining operations. The gap between both domains was organizational, technological and operational. Some of the arguments to keep them separate were valid but some were simply excuses. At the core of IoT adoption are four sets of solutions (connected operations, remote operations, predictive analytics and preventive maintenance).

All of them require the data to flow from the plan to the IT enterprise infrastructure and to the cloud. The same goes for security. Organizations must adopt one security architecture across their entire enterprise. These reasons have been driving the convergence of IT and OT. Some customers (e.g., Harley) have pushed both teams to work together on common problems,evolve their processes and skillsets (e.g., how to adopt IT technologies on the plant floor or how to evolve IT standards to meet OT requirements). Some customers moved IT teams to report to the OT/Line of Business leaders. Whatever the method, it is clear that in order for the IoT strategy to work, both teams must start to work together.

Q. How have IoT security measures evolved in recent years and what is still needed on thatfront?
A. Traditionally, in the industrial world, the OT teams relied on physical separation of their facilities as a primary security mechanism (security by obscurity or perimeter defence). Many organization’s experienced Shadow IT efforts, where the business teams implemented their own technology solutions behind ITs back. The adoption of IoT and cyber attacks such as Stuxnet changed all that.

The industry realized that the traditional approach was not sufficient. Since then, the industry has gone through an initial phase of panic following Stuxnet that involved band-aid approach to security.Increasingly, the companies started to implement continuous risk-based self-defense based on policy based architectural approach that involves a comprehensive approach to before (how to reduce the chances of being hacked), during (how to quickly discover that you are being hacked) and after (howto identify what data was compromised and remediate) the attack.

Q. How are you seeing IoT affecting roles in the modern workplace?
A. Like many major technology and business transitions in the past IoT is impacting jobs and roles in the work space. Think about the transition from horse and buggy into a car. Yes, the role of the buggy driver disappeared but so many other jobs were created as the car became ubiquitous: from gas stations, to taxi drivers. The same is happening with the IoT transition. Some of the roles are being impacted. You don’t need to send a person to check the status of the meter now that the meter is connected and sending you the information remotely. But at the same time so many new jobs are getting created from data scientists to remote operators to application developers. The fact is, that in the US and Western Europe there are tens of thousands of jobs that are not filled every year since
there are not enough qualified candidates.

Q. Why do you call IoT a revolutionary economic opportunity?
A. I do believe that IoT will have a greater impact on how we run our businesses, our jobs and our lives than the original commercial internet had over the past 25 years. Right now, the initial phase of IoT adoption is focused on improvements in efficiency and profitability. But we are also starting to see IoT creating new revenue opportunities and new value propositions from mass customization and personalization to the adoption of new service-oriented business models. That’s the exciting part.

Q. How and why are B2B innovations are driving the transition to IoT today?
A. As they say, in the business world, you tend to follow the money. The biggest impact of IoT in the short-term has been on dramatically improving and automating archaic and manual processes in many traditional industries. For example, in the construction industry so much is still done using pen and pencil. Thus, by connecting devices and processes within the enterprise, IoT is bringing immediate top and bottom line impacts. Just look at Harley Davidson and how they used IoT to reduce the time to deliver a customer bike from 180 days to 2 weeks. Or a mining company that implemented preventive maintenance solution that saves it $2M per day every time it prevents one of
the monster trucks in the mining pit from breaking down.

Q. Which first changes will consumers experience from the IoT revolution and which might be a long way off?
A. It is fair to say that IoT applications in the connected home is one of the most over-hyped aspects of IoT. While I do see a lot of value in connecting individual devices to the internet (for software upgrades, troubleshooting or specific purchases), we are just starting to see some early applications of IoT that require the devices to inter-connect within the home (e.g., elder care or home security).

So, the killer apps for IoT in the home are still a ways off. However, the dramatic improvements IoT is bringing into the business world are already benefiting consumers. From enabling mass customization and personalization to more efficient and predictable deliveries of goods, IoT is already making an impact on our everyday lives.

Q. What explains today’s gap between the huge hype around IoT and the far less expansiveimplementation of the technology?
A. All of us (including me) are so excited about the impact IoT will have on how we conduct our businesses, our jobs and our lives. However, as an industry we focused too much on technology, on the promise of billions of devices getting connected and trillions of dollars of economic impact. A lot of this messaging over the past few years has gone over the heads of people who operate the plants and run the businesses. They look for business outcomes and not for the latest and greatest technology. So there has been a gap between what and how the industry has been touting and the needs of line of business (LoB) managers. This is precisely the reason I wrote this book to help business decision-makers implement IoT today and start on the IoT journey.

Q. What are some pervasive problems we’ve seen increasingly that could get addressed soon by IoT technology?
A. There are literally hundreds of use-cases that are being addresses by IoT solutions today or being tested. From environmental issues such as clear water, better use of water resources (better irrigation), air pollution to reducing traffic congestion and time it takes to find parking, I firmly believe that IoT will have a profound and positive impact on our businesses and our lives.

Maciej Kranz, vice president, Strategic Innovations Group, at Cisco brings 30 years of networking industry experience to his position. He leads the group focused on incubating new businesses, accelerating internal innovation, and driving co-innovation with customers and startups through a global network of Cisco Innovation Centers.

For more information about his new book, visit: www.maciejkranz.com/

Comments are closed.