Build the business case alongside your IoT PoC
Industrial IoT is becoming the keystone of digital transformation. However, “many companies are implementing IoT technology, but struggle to define the best opportunities for using its measurement and tracking capabilities,” said Mike Burkett, VP and distinguished analyst with the Gartner Supply Chain Practice. In this post, we look at why and how industrial companies should build their IoT business case as soon as possible for successful at-scale deployment of Industrial IoT technologies.
Business case analysis: the gateway to IoT success
Analyzing the economic value and the return on investment (ROI) of an IIoT project has been proven to be the key for success. This step is mandatory to ensure that companies — not just R&D departments — seriously engage in their digital transformation via smart technologies and reap its rewards.
Identify savings opportunities
Potential gains are very diverse and numerous: saving energy, improving working conditions, increasing productivity…
The first step to elaborate a business case and calculate the ROI of an IoT solution consists in identifying all potential sources of savings and quantifying them financially. To do so, it is necessary to interview the people who will be directly impacted by the new visibility or the remote capabilities offered by the solution.
The sooner they are involved, the better it is for the success of the project. Building a solid Proof of Value with them is the first condition to demonstrate the ROI and convince decision-makers to further invest in the deployment of an IoT product at scale.
In our new technical whitepaper we identify how to systematically identify and quantify these savings in the manufacturing context. We also show how you can easily undertake and accelerate this rationalization work with Stackeo Biz Assistant modeling templates and examples.
Detail the costs
A smart IoT solution can be in-house made or pre-packaged. For an in-house solution, the design and development phases have to be taken into account to estimate the total cost of the solution.
If one has selected a pre-packaged solution that answers the needs, the solution vendor will certainly charge for the device acquisition, and a monthly subscription for the application and management operations fees.
In general, for the end-customer, the savings and costs analysis helps to determine if the solution will be rapidly profitable and what conditions are required for obtaining a given ROI in terms of fleet’s size, amount of energy saved or time reduction.
Forecast revenue increase
Another category of benefits is important to explore when analyzing cost-benefits of an IoT solution: the potential increases in revenue. These can come from an increase of production thanks to improved efficiency, or a sales growth thanks to better product traction due to an enhanced customer experience or a richer product.
The shift towards a “service-based” model is also a strong trend which brings many advantages. New business models can generate new revenue from digital services. Such profound transformation requires deep managerial commitment. We will have the opportunity to discuss this in a future blog post.
Qualitative benefits: the cherry on top or key drivers
Beyond the direct economic benefits, IoT is also a source of substantial qualitative gains. For example, an IoT solution can reduce the risk of human error using automation, make a task less tiring thanks to remote control, reduce machine downtime by leveraging predictive maintenance, diminish the stress with higher visibility and ultimately produce better and higher quality products. Finally, IoT provides precious environmental oversight and savings: reducing natural resource consumption, waste, pollution and greenhouse gas emissions. Another interesting story to develop.
Collecting and analyzing data will provide deeper knowledge and understanding of the production, consumption and end-user needs. This information will, in turn, help companies adapt their business strategy in order to sell better, more, and to a wider audience, but also to sell differently. The value of IoT lies in the data collected and analyzed, by providing valuable insights to take action and deliver positive outcomes.
- Business case analysis is as critical as technical prototyping for IIoT projects achievement
- Business simulation should be done in the planning phase to ensure projects success
- The end-customer has to be involved in the business case analysis process
- Quantifying the ROI at scale is important, especially for Industrial IoT applications
- ROI is determined not only by Costs and Revenues but also by Savings
- IoT impact can be jointly financial, social and environmental