Don't dream big when taking on industrial or enterprise IoT

As inspiring as the phrase business transformation is, I've decided that when it comes to industrial or enterprise IoT, it's better to start small. Most executives by now are well aware that you should begin with a use case, but what's become more clear as time has passed and projects have failed is that maybe business transformation shouldn't be your first goal.

Peter Zornio, chief technology officer at ‎Emerson Automation Solutions, says that in his experience, the operations guys in building systems or in a plant want a use case and an ROI, while the IT shops tend to want to install a platform so folks in the business can build their own applications on top of it.

"Tangible ROIs that are easy to see are great," Zornio says. "Operational guys love that because they have to justify their spend, while the IT guys want to think big. These are the guys that 15 years ago convinced everyone to spend hundreds of millions on ERP systems."

— Emerson's mock-up of its connected refinery infrastructure. Photo by S. Higginbotham.

Zornio isn't bashing ERP systems, but if you ask ERP buyers if that money was well spent, many of them wouldn't really know. Which is why Zornio is a big fan of metrics when discussing IoT projects.

He's not alone. Jason Shepherd, a senior director and IoT CTO at Dell, says, "Too many IoT projects start as science projects (e.g., “Wouldn’t that be neat?”) with no clear metrics for success." You know what's really hard to measure? Business transformation.

So if measurement is the key, how should you think about that? In some situations, a use case and the subsequent savings are crystal clear. For example, if you automate data collection that normally requires an employee, calculating the savings is easy.

But Zornio says other use cases, such as ensuring reliability, are more difficult. First you have to come up with the number of times a particular part or machine fails, then you need to figure out the cost to the production process or the team. You also have to factor in the cost and time it takes to make those repairs. Replacing a part that is commonly in inventory vs. replacing something that might have to be ordered will factor into those costs.

Those kinds of calculations are more subjective than calculating the cost of replacing a worker. You could debate how often equipment fails. Or how much it costs when it does fail, depending on what a company values. For example, downtime in one part of the plant might be relatively unimportant because there's a backup or low demand during certain times of the year. So it's always better to search for the obvious. Sometimes, the flamingly obvious.

"We had a customer come to us about monitoring pumps. There, the risk wasn't downtime, but that when one of the pumps failed it tended to catch on fire," says Zornio. "In that case, the ROI wasn't about money saved as much as it was about deciding how valuable it was to the organization to avoid fires in their factory." (That entire conversation has me thinking that an enterprising IoT systems integrator should scour the trade press for industrial disasters to find their next sales prospect.)

Assessing IoT projects' value isn't just useful for the companies buying into connected sensors or products. It's also important for companies trying to build solutions for industrial and enterprise IoT.

That platform mentality is a common one in Silicon Valley, but it's hard to sell. Especially if you need a deep understanding of specific industry data around costs and functioning of equipment. That's why many of the big companies are teaming up with those in specialized verticals to pitch their platforms or services.

But again, it appears that success today is found most often in the smaller projects as opposed to the business transformations. Shepherd advises that when choosing a project to ensure that the use case is relatively straightforward so the company can get a "quick win."

"A quick win can grow into more advanced benefits, but don’t try and start with too much. For example, start with basic monitoring for visibility and then add analytics," he says.

We'll talk more about what this means in future issues of the newsletter along with the challenges associated with making sure that your employees don't sabotage your business goals—or the eventual business transformation itself.