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Manufacturing Tomorrow

Manufacturing Tomorrow


Three questions to answer to learn how the Internet of Things could affect your business

Oct 04, 2016
By: Mark Stevens

The "cool" factor in the tech world has manufacturers excited and anxious at the same time. Business owners look at the GPS on their bicycle or the fitness monitor on their wrist and wonder if this kind of thing could somehow apply to their company.

More and more manufacturers are realizing that, in the past, they simply made a product. Today, they're also in the business of technology and exchanging information. The largest companies in the world allocate vast resources to explore the possibilities, but what can the average business owner do?

As you learn more about the Internet of Things and contemplate what it means for your company, consider the following:

1. If you manufacture a product and connect the product to smart technology, providing incremental value to your end customer, could you charge a fee for that service? If the answer is yes, then suddenly that service might be worth more than the product itself.

The Internet allowed us to share information faster and accelerated the way we conduct transactions. Manufacturers, along with the general business world, saw productivity gains, but business models didn't change significantly. The next wave of Internet technology-cloud storage, sensors, and microprocessors-allows data to be analyzed to find dramatic benefits for someone else. Those benefits can change a business model and how a manufacturer presents a product. And the technology is now so inexpensive it can be purchased from a personal checkbook.

Consider the new thermostats controlled by a homeowner's smart phone. The thermostat also logs patterns of family members' coming and going, energy usage, and the weather and adjusts heat and air conditioning settings based on peak and nonpeak energy times. It's saving our country billions and billions of megawatts of energy. The thermostat sector is approximately $3 billion worldwide, but the product is helping shape a $6 trillion energy sector. It all started with a $250 thermostat.

2. How could my product create more effectiveness for an end user? The answers could be substantially disruptive and greatly impact your value chain.

Not long ago, airlines owned both their planes and the jet. Then, manufacturers began putting sensors in the jets they sold, monitoring every minute of every flight on every plane. Suddenly, the manufacturer was better positioned than the airlines to predict performance and preventive maintenance needs and subsequently improve the design of future jets. These companies created a new business model by leasing the jets to the airlines with the promise that the manufacturer, having proprietary information, would take care of the jet for them. Sensors on the jets made the maintenance cheaper and more effective than individual airlines could manage. As a result of the analytics, airlines learned how to save fuel by changing takeoff and landing procedures.

3. Is the tail wagging the dog? Devices, technology, and infrastructures are readily available for new use. Keep your focus on creating a device or service that aids growth, productivity, or another kind of real benefit. It might be a known or unknown problem to the end user.

The rules of business competition and competitive advantage haven't changed. Your business model must still support a value proposition targeted at specific customers and certain types of relationships. The Internet of Things is exposing companies to new competitive opportunities and some threats that could sneak up on them. It's forcing companies to rethink and retool how they're going to respond. The ones that find the value proposition for their customer segments are the ones that get ahead.


Mark Stevens
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