The Industrial Sector, As We Know It, Is Changing: Are you ready?

Pat Mascia

The heavy machinery and manufacturing industry is shifting from the traditional product-based business model to a subscription-based, outcome-focused one. This shift will introduce new service agreements that pay suppliers based on product performance; putting extra pressure on suppliers to guarantee results.

The dated technology currently being leveraged by the industrial sector will no longer do the trick. Suppliers need more efficient ways to analyze, track, monitor and predict performance. As new service agreements become the norm, suppliers must streamline their operational efficiencies to improve overall business capability.

IoT and Cloud Software Advancements Are Key

One solution for improving connected services and operational efficiencies is the Internet of Things (IoT) and cloud software advancements. It’s only by offering connected services and cutting-edge technology, like what GE Oil and Gas offered Diamond Offshore in their BOP service agreement, that businesses will be able to participate in viable performance-based service agreements. Today’s cloud computing allows complex and predictive data to be communicated between product, operators and the supplier for guaranteed performance. Products with IoT connectivity will only become more common in the industry, and suppliers that don’t offer them are more likely to lose a project bid.

With assistance from IoT solutions, manufacturers will improve their machine’s reliability and uptime. Improvements in actual process, paired with maintenance prediction and remote operation assessment, are several instances of enhanced operational efficiencies in the industrial sector. ComputerworldUK recently produced a great article on how the heavy industries are making the most of the IoT. When these areas of operations are improved, both human and machines will work together to create higher levels of productivity. The end result is a more engaging work experience for the machinery’s workforce, supplier and manufacturer. For the buyer, the more tangible results include energy savings, waste reduction and improved agricultural yields. In addition to helping manufacturers improve efficiency and offerings, IoT and cloud software will accelerate new service model adoption.

Upgrading Tech Is No Longer a “Nice-To-Have”

Despite the various benefits of this disruption, many organizations still don’t comprehend the implications of this tech usage for their business’s livelihood. The actions industry leaders take now will determine which businesses will achieve long-term success. In 2012, Jeff Immelt, CEO of GE, invested in a software support group that’s grown as an innovation center for more than 4,000 software and data scientists. The team, called GE Digital, redefined GE’s market positioning by creating the platform Predix to run any business partner’s software algorithms in GE’s predictive analytics system. This type of tech offering led Microsoft to establish a partnership with GE that would allow Predix to run in Microsoft’s Azure Services – the largest cloud computing infrastructure provider. The competitive advantage that this gave GE was huge.

In a similar vein, Emerson created a product suite to provide full process improvement solutions to customers. In one case, Emerson was improving operational efficiencies on Jurong Island to avoid 450 kilotons of CO2 emissions and save their client $150 million. Emerson has also used its process know-how, data analysis and understanding of the customer’s process to offer both monitoring and plant optimization services in the oil and gas space. Without this knowledge, the company wouldn’t be able to offer customers any end-to-end propositions. Both Emerson and GE are developing an array of IoT and tech solutions that can be bundled to create a full service. This strengthens both players’ hold in the IoT space, but to offer a holistic IoT service, they must fully build out these offerings and developments. There’s still work to do.

So, What Now?

Like Emerson and GE, organizations must create an IoT strategy to stay competitive. IoT tech development moves faster than most traditional industrial tech development, which adds a layer of complexity. If industry incumbents wait to tackle this transformation head-on, they will lose relevancy. Our experience with offering human capital solutions to the industrial sector qualifies us to recommend forming a specialized IoT strategy team at your organization. The team should include subject matter experts in the outcome-based model adoption process. With technology changing rapidly every day, there’s a small window of opportunity here. The industry transformation is underway, with giant companies like Microsoft, GE and Emerson all investing in this change. It’s time to leave the familiar behind and move toward connectivity, productivity and profitability.

To read more about the shift from traditional product-based business models to a subscription-based one, check out “The New Competitive Advantage: Industrial Subscription-Based Models