The Internet of Things Accelerates Innovation and Value Creation for Manufacturers

I wasn’t around during the Industrial Revolution, but I can’t help but think that today is an even more interesting time to be in manufacturing. I’m happy to be participating this week in the annual Rockwell Automation Fair, where it seems we can see the Internet of Things (IoT) evolving in real time.

Perhaps no other industry is being disrupted by technology more than manufacturing. As manufacturers digitize their businesses, operational complexity increases and competitive pressure builds—driving the need for faster innovation, quicker time to market, and more efficient processes. Those who can’t keep up are left behind.

The Internet of Things is in the middle of all this, both spurring disruption and helping companies deal with it. IoT is a key component of the Internet of Everything (IoE), which is the networked connection of people, process, data, and things. A soon-to-be-released Cisco Consulting Services survey of IT and operational technology executives in 16 countries shows that it’s hard to talk about connecting things without also talking data and process.

For example, when we asked which of the four enabling areas of IoE their organizations most needed to improve to make effective use of IoT solutions, the largest percentage (40%) answered “data,” followed by process (27%) and people (20%). The greatest challenges cited when it comes to handling operational data were:

1. Integrating data from multiple sources

2. Automating the distribution of data

3. Analyzing data to effectively identify insights

Cisco has put intelligence at the edge of the network, where the data is generated, in order to integrate, automate, and analyze data in real time, resulting in immediate insights and decisions. For example, Cisco and Rockwell Automation worked together on an IoT solution for Harley-Davidson to reduce downtime on the factory floor by efficiently managing their supply chain. The Converged Plant-wide Ethernet Solution integrates data from sensors on the factory floor and across their enterprise to optimize parts supply. This solution provides a single view into the supply chain for employees throughout the company, enabling quicker troubleshooting, reduced downtime, and improved productivity. This distributed approach to data processing is a growing trend. Nearly 40 percent of the respondents to our survey expect that within three years, most data generated by IoT solutions will be processed at the edge of the network.

As for process, the Cisco study showed that IoT solutions are being heavily adopted to monitor assets, people, and the environment, and to manage energy. In fact, more than 80 percent of respondents said their firms already have or are planning to adopt IoT technology for these functions. Furthermore, manufacturing executives said they believe 45 percent of their manual processes could be automated with IoT solutions. This can be facilitated by Fast IT, the new operating model for the Internet of Everything, which provides an agile, programmable framework for software-based automation.

The potential value manufacturers can create by implementing IoT solutions is tremendous, totaling about a third of the $8 trillion overall Value at Stake for IoT over the next 10 years. And companies are investing heavily to get their share of this value, with 86 percent of manufacturers in our survey saying they plan to increase their investments at least somewhat over the next three years. What’s more, 86 percent also said their IoT investments have met or exceeded their expectations in delivering business outcomes.

According to economic analysis from Cisco Consulting Services, the value of those IoT-driven business outcomes could reach $141 million in annual earnings before interest and taxes (EBIT) for a typical $20 billion global manufacturer — driven largely by improved asset utilization, process/supply chain efficiency, and smart factory capabilities.

Cisco’s study found that the main business driver for IoT is the need for faster innovation of products and services. And that’s why I’m so glad to be part of it. The companies that do the best job of gleaning insights from their IoT connections will be first to innovate, and first to market, perhaps even blazing the way to a second Industrial Revolution.