Smart Services Becoming a Disruptive Force in the Manufacturing Industry

Data generated by the billions of smart products connected to the Internet are having a transformative impact on the manufacturing industry, disrupting the traditional business/payment/service model. Data from the Internet of Things (IoT) can be analyzed, interpreted, correlated and supplemented and then refined into smart data. This data then become the raw material from which innovative “smart services” are created.

For example, the operators of diagnostic equipment might collect and analyze data from all the diagnostic devices that they are responsible for operating, and use this data to create new services. Munich-based, Device Insight, has developed a platform that collects, analyzes and visualizes data from machines and plants. More than 100 small and medium enterprises are already using the platform to access data produced by the intelligent machines owned by their clients.   

Incumbents at Risk

Many manufacturers are unprepared for disruption in the manufacturing value-chain, specifically moving from a traditional product-centric business model to a service-centric one. According to recent research by Accenture, 88% of manufacturing executives do not fully understand the underlying business models of IoT, or the long-term implications on their industries. Only 40% indicated that they have developed a digital strategy for IoT.

With the rapid adoption of connected products and analytics capabilities to turn data into real business value, manufacturing customers increasingly expect more value and innovation from digitized business models. New entrants, including those with no physical assets, are stepping up to the challenge.

The Rise of Smart Services

Whoever controls the smart data wins. The new digital business models being created will cause existing control points to shift towards service platforms.

Consequently, providers of digital business models will attempt to gain control of the platforms to become leading suppliers of the digital control points for smart services. These companies will grow by creating digital ecosystems, making their platforms available to third parties who can develop their own web-based business models, making the platforms even more widely adopted and unlock new revenue sources.

The Connected Farm platform from Trimble is a prime example. It provides a central location for agricultural growers to monitor their farm operations. The platform’s dashboard portal offers customizable widgets, including information about commodity prices, weather, Doppler radar, rainfall totals, irrigation monitoring, fleet locations, field operations, scouting, maps and much more. Connected Farm then enables other companies to leverage the platform to provide their own smart services to growers.

AGCO, a worldwide manufacturer and distributor of agricultural equipment and infrastructure, now provides wireless connectivity between their systems and the Connected Farm platform. The collaboration means that customers can access their AGCO machine data from within the Connected Farm dashboard. This type of platform-based collaboration gives customers easier access to operational data to improve productivity, mobility and decision-making.

Responding to the Threat

Manufacturers are at risk of becoming interchangeable vendors. Those that want to respond to the competitive threat and become a player in the smart services arena need to make a strategic decision about the part they want to play in the overall ecosystem. The roles include:

1. Owning the smart services platform itself
2. Providing the enabling technologies, such as connected devices, open application programming interfaces (APIs), analytics and Software as a Service
3. Providing platform operations such as payments, logistics, or smart data management
4. Offering specific products or services on the platform, such as financing, insurance or types of relevant and timely information

Next they need to make appropriate investments in intelligent infrastructure and applications. Finally, careful consideration of the talent and change management implications is required as the provision of smart services is likely to result in a profound change in people’s work, especially as machines and humans interact with more frequency.

Continuous effort and investment will be required if manufacturers wish to play a leading role in actively shaping the impending changes caused by the blurred lines between the industrial and service sectors. Smart services are going to play a big role in transforming the industry, and manufacturers need to be ready to help lead the way.

This article was originally published on our sister site IndustryWeek.