Digital Transformation and IoT
Over the last several months I have engaged with numerous companies and customers who are defining Digital Transformation and the Internet of Things (IoT) as two distinct business initiatives. I believe this is an approach that will be costly in time and dollars. IoT should be viewed as an enabler of a digital transformation strategy.
Digital transformation is the objective; it is the investment in technology and the automation of business processes to more effectively operate a business. Digital transformation reduces cost through improved efficiency. It increases customer satisfaction through improved quality and proactive services. It broadens the ability to engage with customers across multiple channels (online, in store, mobile, etc). And it provides a means to create new business models.
Cloud computing, application programming interfaces (APIs), mobility, and social media are the technology trends that have collectively enabled the digital shift. IoT is another enabler.
Cloud computing has created a landscape of competition; nimble businesses can deliver solutions cost effectively. Application programming interfaces simplified integration and enabled cloud and mobile application development. Mobility has offered access to information anytime, anywhere. Social media, such as Twitter or LinkedIn, has customers informed and empowered. The Internet of Things is the connectivity of physical objects over a network, creating integration between the physical and digital worlds. These trends enable digital transformation.
Lets look at a few examples of IoT as an enabler of digital transformation.
Where you find costs in the business, you will also find low Net Promoter Scores (NPS) or a high volume of customer service calls. This is an indicator of areas ripe for digital transformation. Warranty claims are one example. The data from sensors in a manufacturing environment (IoT) can be used to determine everything from heat and humidity in the plant to the speed of a machine. This information can be used to determine (and prevent) potential defects - reducing potential warranty claims. This will both reduce costs and improve customer satisfaction.
Another example of digital transformation enabled by IoT is around the most widely referenced use case, predictive maintenance. The basic scenario is to use sensor data from production equipment in manufacturing, or mechanical parts on a train or airplane or even rides at a theme park, to manage downtime, ensure safety, and optimize inventory. The converged digital transformation use case is the following - step 1) sensor data tells you a part will need to be changed within the next 15 days of use, step 2) analytics engine sends request to the back-office to automatically source or order the part, step 3) part arrives and once checked into inventory the system, step 4) the inventory system connects to employee management system to identify the person with the right skills to fix the part and step 5) the individual is automatically dispatched to replace the part on a scheduled downtime. This example use case demonstrates reduced costs associated with unplanned downtime, and improves customer satisfaction when the production meets the expected delivery date.
Whether it is automation for B2C (i.e. automating interaction with customers as part of online, in store, or mobile engagement) or B2B (providing pay per use services access to partners through APIs to transform a business model), or automation of manufacturing (using data from sensors to reduce warranty claims) - IoT is an enabler of digital transformation. A digital transformation strategy that defines the end-to-end process utilizing IoT as an enabler, will have the most success.