During the Smart Factory Summit we attended last month, Banner Engineering’s Matt Negaard gave a fantastic presentation on the changing paradigms of IoT and Digital Transformation, pointing out that manufacturers need to stop thinking about industrial IoT as a moonshot requiring million dollar pilots to prove its value and start thinking of it as a core capability.

If you’re not already familiar with them, Banner Engineering is a leading manufacturer for sensor solutions. They range from really complex condition monitoring equipment to simple and powerful peel and stick wireless sensors. Installing one of their low-cost sensors can provide manufacturers with a lot of data around machine cycles, capacity, downtime and quality.

His message was simple: Get connected and start collecting data as quickly and cost-effectively as you can and the ROI will prove itself out. Once this capability is in place, then start thinking about how the data can affect the bottom-line.

Rethinking the Barriers to Achieving ROI in IoT

In a recent study from LNS Research, 34% of manufacturers complained that their top challenge for IoT was “Building a Business Case.” and 32% cite funding as a major barrier. Negaard’s approach to the IoT puzzle is to get manufacturers to think about the business case in two ways:

Feasibility – Determine what the real barriers to implementing IoT are?
“Often times it’s a matter of how you frame the IoT question and whether it’s really a question of technical feasibility rather than conceptual or cultural. Gathering data and getting connected is actually one of the easiest problems to solve, in part because the market has already solved it. Many technical challenges can be overcome with fairly low-cost solutions.”

Business Viability – What kind of problems do you want to solve?
What are your most pressing business concerns? Machine Downtime and Maintenance? Capacity and Throughput? Quality and Yields? Align your IoT investment with the existing problems you want to solve.

“It’s possible now to deploy a thousand sensors on a thousand machines really quickly and affordably” he says, dispelling the myth that IoT is prohibitively expensive, “but manufacturers will also see value right away at a much smaller scale.”

Instead of trying to justify IoT formulating the business case that provides a big win, Manufacturers should leverage Iot to achieve existing business goals, focusing on a lot of small, more achievable wins.

ROI Should Focus on Continuous Improvement Efforts

Pattrick Fetterman from LNS Research agrees and highlights another reason why manufacturers might be struggling to define the business case for IoT and justify the expense: Data has traditionally been siloed to the c-suite executives and not leveraged into the day-to-day operations where it’s impact hasn’t been obvious.

“Companies that lag peers in operations maturity tend to reserve data and decisions to top managers and the C-suite.”

The manufacturers consistently demonstrating ROI from their IoT investments are the ones gathering from the plant floor and pushing that data back to the plant floor. He points out that for smaller to mid-sized manufacturers, the path to ROI from IoT can even be easier than for larger competitors, since implementation is at a smaller scale and there’s much smaller divide between management and operations.

He also notes that manufacturers who build out IoT capability that continuous improvement efforts show powerful ROI:

SMBs need to focus on Continuous Improvement programs and manage by metrics to achieve significant results

“One of the more surprising findings in our recent research is that companies who manage their Continuous Improvement programs with advanced technology show a 2x to 3x improvement in outcomes, as compared to companies manually tracking these programs….[for example] SMB manufacturers that use digital technologies to track programs show a 300% increase in first pass yield. The inference is clear – SMBs need to focus on Continuous Improvement programs and manage by metrics to achieve significant results; they can use advanced technologies to track the CI programs and accelerate improvements by a marked amount.”

To summarize, manufacturers at any scale should be confident that IIoT and analytics will prove value, if they focus on implementing the technology with the goal of solving everyday problems and not magically transforming the business overnight.