internet of things report 2014 by copperberg research

Internet of Things 2014

Pricing Excellence

Sales Ef ectivenessMarket Segmentation

Servitisation

Aftermarket strategy

Supply Managem

ent

Integrated Logistics

Spare Parts

Enterprise Asset Managem

entProduct Innovation

Product InnovationInternet of Things

Risk Management

Field Service

Business Process Management

Human Capital

Digital Manufacturing

IT & Business Intelligence

We are glad to present the first edition of Copperberg Research’s Internet of Things survey report.

The Internet of Things (IoT) survey is a long-term initiative to shape a trustworthy, forward-thinking overview of the impact IoT will have on multiple business sectors and verticals. Over future editions we will look at the usage and maturity of IoT in Europe, from both private and public perspectives. The survey provides insight into the current perception of IoT, as held by leaders in the manufacturing sector.

We invite you to learn more about current and future IoT initiatives, trends and challenges across diferent sectors and organisations across Europe.

To get involved, join our community online

http://www.linkedin.com/groups/IoTEurope

www.copperberg.com

©2014 Copperberg

2 Internet of Things 2014

Content

5 Executive summary

7 About the Survey

9 Results

9 General statistics

11 Macro trends

12 Competitive Edge

13 Opportunities/Advantages

14 Capabilities of IoT within the manufacturing industry

15 Challenges

16 Do you feel IoT will change…

Internet of Things 2014 3

and moreand moreX

Machine Industry Automotive Consultancy Roles IT

292 unique Respondents

23,66% 9,32% 7,53% 10,04%

From other industries

including food, FMCG & Energy

25,81%

ServitizationGlobalization

Connectivity

Regulation

Key Trends ImpactingBusiness Include


Analysis of Survey

Executive Summary

Designed to present a general overview of Internet of Things (IoT) and its impact on the business in various organisations throughout Europe, the survey shows good awareness of IoT capabilities but also challenges and opportunities. Although the respondents are coming from various industry verticals and job roles, many see similar opportunities and challenges.

Despite IoT still being in it’s infancy, 55% of respondents already believe that it will give them a competitive edge within the next 18 months. 35% of respondents stated that they were unsure of the advantage they would gain, highlighting the need for further discussion and education.

Within the manufacturing industry 82% feel that IoT will change how products are developed, 92% feel that IoT will change business processes and models, and 94% feel that IoT will change how products are serviced. Results show that IoT will certainly have a significant impact on business moving forward.


About this survey

“IoT in the manufacturing industry 2014” is a quantitative research focusing on Internet of Things trends in manufacturing organisations. Created to seek input from the global manufacturing community and our delegate network, the survey evaluates the current market awareness about IoT, it´s benefits, potential areas of implementation and investment, potential challenges, tools, and the definitive future outlook. This is a first edition of the research and the intention is to develop in the following years.

Methodology

An online survey was conducted from 26th of March 2014 to 29th of April 2014. A target group from our community members (3700) were invited in the survey; 292 responded, for an overall response rate of 7.9 %. The survey was answered by respondents from various organisations across the manufacturing industry in Europe, North America, Asia, and Africa.

About Copperberg Research

Copperberg Research is the specialist research division of Copperberg, the leading events organiser for the Global Manufacturing industry. Created to provide timely reports and analysis on key industry developments, the division supports the manu-facturing community with targeted research and surveys. The division supports a portfolio of Midfield Media branded products dedicated to keeping senior executives from global organisations informed and educated.

The Copperberg team aims to provide the IoT community with the perfect combination of networking and education. Giving leading edge ideas, innovative case studies and filled with key insights from leading organizations combined with hundreds of minutes of organized networking.

For more information please visit: www.copperberg.com



The vast majority of the respondents identified themselves as being part of the machinery and industrial equipment (23.66%) sector. The next most significant sectors were IT (10.04%) and Automotive (9.32%), followed closely by consultancy roles (7.53%).

The most significant percentage was the ‘other’ option, which carried over a quarter of the votes (25.81%). Within this option the most significant answer highlighted an interesting indicator that IoT is being embraced by the FMCG/Food sector, with 22% of ‘other’ respondents identifying themselves with this sector (total of 5.73%). The remaining answers were varied, with the only other significant answer being the energy sector (2.87%).

The majority of respondents identified themselves with the research and development (28.04%) function/role. The next most significant function was After Sales & Services (19.56%), followed by the operations and product sales functions (both at 12.55%). Once again the ‘other’ option was a significant choice, with the most prominent answers being marketing (5.17%) and general management (4.06%).

0 10 20 30 40 50 60 70 80Other

AcademiaConsultant

ITMining

HealthcareHVAC

RailwayConsumer ElectronicsAerospace & DefenceProcess Automation

Oil & GasMachinery Industry Equipment

MarineAutomotive

Industry

Which industry do you (best) represent?:

0 5 10 15 20 25 30

Marketing

Management

Other

After Sales & Services

Product Sales

R&D and Engineering

Supply Chain

Procurement

Operations

Job title

Which Title do you (best) represent?:

We asked participants which of the following macro trends are impacting the way their organization is conducting business? More than one answer was possible.

Macro trends


Despite becoming more guarded since the 2008 global recession, globalization (68.06%) is still the most significant macro trend impacting business decisions. As companies reach out to new markets and regional areas, the business impact of globalization will highlight key strategies that must be undertaken in order to efficiently introduce businesses to new channels.

Connectivity (47.92%) and digitization (46.53%) follow globalization as prominent trends. Both trends are easily accessible from multiple devices and are increasing convenience and business mobility. Always-on connectivity offers fantastic business applications, and the new IT paradigm is forcing companies to approach IT, business, and the digital landscape with new concepts and strategies.

Almost equally important to how organizations are now conducting business are regulatory affairs (44.79%). As business sectors evolve to better handle the impacts of globalization, digitization, and connectivity, industry regulators are also evolving. The need to understand how to regulate new markets, technologies, and business is changing the very foundations of the regulators approach, and therefore altering the regulatory landscape.

Customers, whether they are from a consumer or business profile, now accept better, mutual value from vendors/suppliers. As such servitization (34.38%), and therefore the innovation of the organization that supports the process, has also been noted as a key macro trend for businesses. Additionally the financial and strategic benefits, such as increased profit margin and competitive opportunities, all add weight to the adoption of this trend. Furthermore the most prominent advantages appear to be market driven, including product differentiation and the creation of stronger customer relationships.

Many have realized that as customers become more active in their purchasing choices, personalization (28.13%), and more specifically predictive personalization, is becoming a major driving trend. The benefit of this macro trend helps companies tailor their offerings and marketing communications precisely to the needs or wants of the customer.

The final major trend that our respondents highlighted was software intensive products (24.31%). Software intensive products are seen as providing a significant competitive advantage, driving industry innovation, and providing far greater customer satisfaction. Smart products and smart systems are at the heart of the digital transformation that is changing the way business and customers interact. As products become software intensive products, companies must transform their personnel, processes, and technologies to fully utilize the benefits of this intensive change.

As macro trends drive businesses into the global arena, into new markets, and push out new products, it becomes clear that the collaboration and marriage of these key trends is the key to unlocking success in the new digital, innovative landscape.

0 10 20 30 40 50 60 70 80

Connectivity

Servitization

Software Intensive Product

Personalization

Regulation

Globalization

Digitization

Competitive Edge


55.02% of respondents believe that either the implementation or the expansion of IoT within their organization would give them a competitive edge in the foreseeable future. This is in stark contrast to only 9.69% of respondents that do not believe being more active in the IoT arena would give them a competitive edge over the next 18 months.

Highlighting the complex nature of the IoT world, over 1/3 of respondents stated that they are not sure if they would achieve a competitive edge by being more active in the field. This suggests that large portion of the sectors surveyed are still unclear as to how IoT will impact their business, suggesting there is a real need for further education on the subject.

What IoT advantages might the last two groups miss out on? Setting aside the major challenges and difficulties in establishing an effective and fully realized IoT strategy, some strong advantages can be seen.

Do you believe your organization would gain a competitive edge within the next 18 months, by being more active with IoT?

55.02% of respondents believe that either the implementation or the expansion of IoT within their organization would give them a competitive edge in the foreseeable future. This is in stark contrast to only 9.69% of respondents that do not believe being more active in the IoT arena would give them a competitive edge over the next 18 months.

Not sure

No

Yes

n Increasing productivity and enhanced business processes via highly networked and connected devices

n Customer profiling achieved by tracking history and interests by using location-based trackers to offer promotions, offers, or alternatives

n Using sensors to track the real time location of products to help make inventory management far more efficient and reliable

n Simplification of transportation with the introduction of sensors to track contributing factors

These include:

Opportunities and Advantages


n Connectivity

n Visibility

n Monitoring

n Improved data gathering

n Analytics

n Better decision making

n Increased customer satisfaction

n Customer insight

nGlobalization of services & operation

n Increased product offering & sales

Today’s organizations are in constant battle to get the most out of their current operational assets. Challenged with reduced oper-ational budgets, rising material costs, aging assets and workforce, organizations are trying to find ways to maximize the Return of Assets and do “more with less”. By linking Computerized Maintenance Management System (CMMS) and Predictive maintenance (PdM) tools with Enterprise Asset Management (EAM) software, asset managers today can in real time monitor the performance of all assets globally. This enables organization to increase Overall Equipment Effectiveness (OEE), minimize unscheduled down-time and total energy consumption, reduce maintenance cost and finally improve operational margin vs. corporate plan. IoT will be the next natural step to connect everything together.

“Internet of Things” enables creation of new products and services across all channels. Today’s manufacturers are reinventing their organisation capabilities and processes to better create mutual value through a shift from selling product to selling Product-Service Systems (servitization). There is an obvious link between servitization in manufacturing and IoT. Machines/products of to-morrow will be able detect the problem, capture and analyze the information through a service system, advise the manufacturer to deliver the right replacement part, and schedule the field service technician once the part is delivered, ensuring a successful first (and only) service call. All of our home appliances, can and most probably will, be connected to our smart devices with which we can easily optimize and monitor their performance. As we speak, organizations working within the automotive, aerospace, medical devices, consumer electronics sector and etc., are already designing and offering products that have IoT technology embedded in their bluprint. Our research shows great emphasis on the connection between IoT and future product development and value offering. Successful companies will focus on a few things to differentiate, meet customer needs and deliver ROIs that provide the basis for continued investments.

“The next big step will be to think through the interdependencies among the machine, the production components, the manufac-turing environment, and the IT that connects it all, so that the production technology controlling the machines merges with the technical data of the component.” - Dr. Heinz Derenbach, Chairman of the Executive Board of Bosch Software Innovations

As we are entering the era of Industry 4.0 - following the steam engine, the conveyor belt, the first phase of IT and the automation technology - many organizations are already taking steps to implement smart manufacturing, increase efficiency, minimize operational costs, and all the while producing more products and increasing customer satisfaction.

The manufacturing industry has for years been investing in computerized automation, sensors, ERP software, specific management and operational systems, tools to optimize the business, lower costs, create greater value proposition, increase margins, and ultimately gain competitive advantage. Combining all of these systems and tools to create “One version of the truth” and combining them with Big Data and M2M will bring great advantages to organizations.

The potential value of “Internet of Things” is tremendous. Although coming from various organizations and industry verticals, the survey participants in general agree that the biggest advantages of “Internet of Things” are:

In supply chain, the greatest benefit of Internet of Things is greater visibility. Supply Chain Management connects businesses to customers, connecting many activities like planning, coordination and control of raw materials, parts and finished goods. By implementing IoT solutions, supply chain managers can increase supply chain visibility, improve transactional tracking and asset location while reducing inventory levels, minimizing theft and unnecessary damage of products or assets and improving labor utilization and fleet management. To achieve this organisations need to create a digital value network by uniting people, business, and things.

These advantages will lead to:

Capabilities of IoT within the manufacturing industry


The survey shows that IoT will be a useful and appreciated tool for the manufacturing industry. Manufacturers today are on a journey - to transform from a product-oriented mindset to service-focused solutions providers. This is mainly due to the higher margins in service sales compared to product-related sales, and the ability to use service offerings as an opportunity to differentiate (be more competitive) in an increasingly commoditized and crowded marketplace.

As such, of the capabilities that IoT could bring to manufacturers’ products, the highest rated ones all center on after sales & services activities: monitor product condition (39.33% of respondents rated as very important), remotely-operated products (32.56%), and instantaneous services (31.25%). These three capabilities will offer tremendous opportunities to service-minded manufacturers as they will be able to develop and innovate their service offerings even further: the increase of data from the connected machines will allow them to monitor their products usage in greater detail, and will thus be able to take proactive approaches in service maintenance. However, for IoT to become a successful support, manufacturers will also need to develop other competencies around it, such as how to handle an increasingly larger and larger amount of data.

The next best-rated capability is monitor environment (24.28%). This is an exciting capability to some targeted industries that operate products or machines in extreme weather conditions such as the marine, oil & gas, or utilities industries, or other industries sensitive or impacted by the environment.

Personalized/customized products came in with what seems at first surprisingly low numbers (21.14%). However, it did receive a 4 out of 5 from 42.86% of respondents. It is also a capability that will have a greater impact on more B2C-oriented industries since, where service is the key differentiator in the B2B sector, personalization of products is that equivalent to the B2C sector. Expect a much higher rating in a similar survey conducted with the Retail or Consumer Electronics Industry, for example.

The last, and in this instant least, important capability is self-operating products with 17.32%. As with monitoring the environment, this capability will have a significant impact on specific industries, especially within the utilities or energy sectors.

IoT offers many interesting capabilities that manufacturers will need to master before they can fully exploit them. However, it is clear that the potential benefit is huge, and there are many ways the capabilities can be developed to fit each industries and organizations to help them grow. The future of both IoT and manufacturing promises a challenging but interesting journey.

0

10

20

30

40

50

60

70

80

5 (Very Important)

4

3

2

1 (Not Important)

Self-operating products

Instantaneous services

Remotely-operated products

Monitor environment

Monitor product condition

Personalized/customized products

Challenges


Just like the personal computer, the internet, and mobile devices , IoT will change how we work and live. Although IoT is in an early adoption phase, (According to the American Society for Quality, only 13 % of manufacturers have implemented IoT), our survey respondents in general agree that IoT is or will be a critical element of future manufacturing.

n Regulation

According to the survey respondents, the most important thing that needs to happen is Internet of Things to reach critical mass. Once that is achieved, others will come along quickly. In general the overall macro challenges can be divided on:

n Standardisation n Technology n Implementation

Internet of

thingsRegulation

Privacy issues

Security

Standardisation

Legacy systems

Too many entry points

Speed

Data storage

Guidelines compliance

Information security

WLAN infrastructure

Technology

Speed

Accuracy

Connectivity

Complexity

Security

Integrity

Implementation

ROICost

Scale

Speed

Time

Although many will agree that regulation of IoT could be both accelerator and a brake, several countries and agencies have started to look into if IoT should be regulated. The most important things that most probably will be regulated in near future are security and privacy issues. The security issue is simple - How do you prevent unauthorized access to data? The privacy issues are however more complex and it might be a great disabler to widespread consumer adoption. There are some questions to be answered like what data will be collected, stored and used, data ownership and for which purposes will this data used?

Challenges


On the otherhand standardisation is something that many in our survey see as beneficial. This february in Geneva, Switzerland, the ITU standardisation arm (ITU-T) together with IEEE, OGC, oneM2M, and OASIS held a workshop where the main topic was discussing development of standards to support the nascent Internet of Things. The group had emphasized the importance of collaboration among standard bodies, the private sector and government; both in finding their respective roles in an IoT ecosystem growing in complexity, and devising technical solutions and regulations that safeguard security and privacy. Legacy systems and technologies, to diverse entry points of technology, data storage, compliance with various ISP guidelines, information security, unclear ecosystem and WLAN infrastructure were mentioned as mayor challenges by our survey respondents.

Speed • Accuracy • Connectivity • Complexity • Security • Integrity

The challenges related to technology can be divided on speed, accuracy, connectivity, complexity, security, and integrity. Survey respondents agree that speed of IoT technology advancement is crucial for widespread implementation in manufacturing. Although most of the organisations are still struggling with application anarchy and legacy systems, the speed of IoT implementation within the manufacturing industry, boosted by IoT technology advancement, will force organisations to quickly adopt IoT in order not to lose competitive edge and market shares. The accuracy of the data collected, shared, and analysed will be crucial in securing clear value and ROI for both implementors and customers. Connectivity between systems and machines, complexity of the technology, security of operations, and the cost of the technology itself will at large influence speed of implementation and enable organisation to achieve shorter time to market.

Time • Speed • Scale • Cost • ROIAs with every technology, implementation of IoT is coming with some challenges. Organisations feel that the biggest challenge will be to get the commitment from the senior management which is directly linked with the ability to define a clear vision of the ROI. The time from conception to full adoption will depend on the scale of the project itself. In order to keep the senior management engaged and committed, the project needs to have a short implementation time or to be divided in several steps. The biggest factor for faster adaptation among organisations is naturally the cost. The implementation challenges are linked with the organisational ones. Lack of resources, change management, moving to data centered mindset, obsolescence management and old traditions were some of the organisational challenges listed by the survey respondents.

Do you feel IoT will change…

Although only 55% of respondents believe that focusing on IoT would give them the competitive edge, a much larger majority seems to agree the Internet of Things will be part of the manufacturing landscape and affect their organization. 82.18% feel that IoT will change how products are developed. Even more impressive, 92.09% feel that IoT will change business processes and models, and a stellar 94.35% feel IoT will change how products are serviced.

These figures do seem to confirm the previously established tendency that manufacturers are more and more moving towards a service-centric mentality, and that IoT is a great supporting tool in that transformation journey.Many of the respondents agree that product development methods will differ in the near future, as the Internet of Things will enable more personalized, digitized, and connected products that can interact with their ecosystem and each other.

However, the biggest is evidently on how products will be serviced as predictive maintenance and condition-based monitoring systems will improve drastically. And as organizations shift focus towards service revenues, so will processes and business models need to adapt.

Challenges

0% 20% 40% 60% 80% 100%

No

Yes

Business processes and models

How products are serviced

How products are developed

In conclusion, we foresee that IoT will play an increasing role to help early adopters in the manufacturing industry gain a strong competitive edge.

Thomas IgouDirector, Content [email protected]

Amo MostofiDirector, Content [email protected]

Goran Cvetanovski Director, Content [email protected]


Contact us

SURVEY INQUIRIES:

Thomas Igou

Director, Content

[email protected]

Amo Mostofi

Director, Content

[email protected]

Goran Cvetanovski

Director, Content

[email protected]

MEDIA INQUIRIES

Malin Petterson

Marketing Director

[email protected]

GENERAL INQUIRIES:

Copperberg

www.copperberg.com

[email protected]

© Copperberg, 2014

Authors: Goran Cvetanovski,

Thomas Igou, Amo Mostofi

Graphic Design & Production:

Robert Dahlqvist, Coordinatum

Copperberg

Lützengatan 2, 115 20 Stockholm, Sweden

Phone: +46 8 651 10 90

[email protected]

The report can be downloaded from www.copperberg.com/research

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