Spending on Industrial Internet of Things (IIoT) worldwide is expected to reach $500 billion by 2020 and more optimistic predictions of the value created by the IIoT range as high as $15 trillion of global GDP by 2030, says a report.

The most conservative independent estimates place the spending on IIoT at $20 billion in 2012, said report: “Driving Unconventional Growth through the Industrial Internet of Things” from Accenture, a global management consulting, technology services and outsourcing company.

The Industrial Internet of Things has been heralded primarily as a way to improve operational efficiency. But in today’s environment, companies can also benefit greatly by seeing it as a tool for finding growth in unexpected opportunities, says the report.

In the future, successful companies will use the Industrial Internet of Things to capture new growth through three approaches: boost revenues by increasing production and creating new hybrid business models, exploit intelligent technologies to fuel innovation, and transform their workforce, explained the report.

The IIoT is a major trend with significant implications for the global economy. It spans industries representing 62 per cent of gross domestic product (GDP) among G20 nations, according to Oxford Economics, including manufacturing, mining, agriculture, oil and gas, and utilities.

It also encompasses companies that depend on durable physical goods to conduct business, such as organizations that operate hospitals, warehouses and ports or that offer transportation, logistics and healthcare services.

Operational efficiency is one of the key attractions of the IIoT, and early adopters are focused on these benefits. By introducing automation and more flexible production techniques, for instance, manufacturers could boost their productivity by as much as 30 per cent.

Predictive maintenance of assets is one such area of focus, saving up to 12 per cent over scheduled repairs, reducing overall maintenance costs up to 30 per cent and eliminating breakdowns up to 70 per cent.

For example, Thames Water, the largest provider of water and wastewater services in the UK, is using sensors, analytics and real-time data to help the utility company anticipate equipment failures and respond more quickly to critical situations, such as leaks or adverse weather events.

However, there is more to the story.

Although companies are viewing and beginning to leverage the IIoT as an operational efficiency strategy, it also offers rich potential for those that make equipment and products to introduce new digital products and services, generating entirely new sources of revenue to improve both the top and bottom lines. Separately for owners and operators of equipment, such as companies in a process industry, there is a real opportunity for increased revenues. The easy win is to avoid downtime and plant and facility shutdowns, thereby increasing production throughput.

For example, a petrochemical producer can rely on predictive maintenance to avoid unnecessary shutdowns and keep products flowing.

Apache Corporation, an oil and gas exploration and production company, is using this approach to predict onshore and offshore oil pump failures to help minimize lost production. Executives at Apache claim that if the global oil industry improved pump performance by even 1 per cent, it would increase oil production by half a million barrels a day and earn the industry an additional $19 billion a year.

Or take a mining operation, where the ability to quickly conduct an assay of the ore when a drill bit unexpectedly hits hard rock enables miners to resume work in a fraction of the time required before.

For now, at the dawn of the IIoT, manufacturers are going after the low hanging fruit by improving the maintenance and repair services they already offer. But some trailblazer companies are forging ahead with unconventional ways to use the IIoT to provide value to customers, including CLAAS KGaA mbH, General Electric, Michelin, Virtual Radiologic Corp. and ZF Friedrichshafen AG.

While these companies represent inspiring examples, it is important to recognize that the IIoT offers radically new ways to make and think about products and to operate assets and facilities. Many companies are just now beginning to make the transition, and it may not be easy for some industrial, transportation and service-sector executives to capitalize on the opportunity to sell new digital offerings. However, those that hesitate could be quickly outmanoeuvred by existing competitors and new entrants.
In fact, once industries become digital, they also become digitally contestable, meaning companies from outside the traditional industry confines can enter and compete more easily. Think of Google’s moves into driverless automobiles, which are likely to disrupt multiple industries, including car insurance and government licensing.

Another example is Apple’s HealthKit. The platform, which enables health and fitness applications to work together, brings the company into a healthcare data ecosystem now occupied by caregivers, insurers and pharmaceuticals.

To succeed in digitally contestable industries with the IIoT, executives will need to formulate new business models and go-to-market strategies at the macro level, rethink their core business and operations, and introduce intelligence into products, services, processes and more. They will also have to open up their manufacturing operations, production facilities and product designs to new information technologies.

The IIoT is both a growth play and a defensive manoeuvre for today’s manufacturers, energy producers and service providers. If incumbents do not identify and exploit these opportunities, new entrants and start-ups will begin to influence and capture their customers.

So how can executives at industrial companies exploit the revenue-generating opportunities of the IIoT? Accenture’s research on IIoT uses cases and current thinking, along with our conversations with clients and subject matter experts, suggests that executives must meet three imperatives: boost revenues by increasing production and creating hybrid business models, fuel innovation with intelligent technologies, and transform the workforce for the IIoT.

In addition, the report outlined seven steps to help companies move forward quickly and confidently to harness the IIoT’s potential:

1. Think boldly about value.

2. Think about tomorrow’s partner ecosystem.

3. Start now to design and develop your platform.

4. Closely study the financials.

5. Sell your sales channel on promoting new digital products and services.

6. Clarify legal rights, obligations and secure access to information about your installed base.

7. Put people at the center of executing your strategy. – TradeArabia News Service