You’ve no doubt heard that the Internet of Things (IoT) is expected to be a multi-trillion dollar industry in the next decade. Much of that optimism is predicated on the promise of greater efficiency gains for enterprises as a result of IoT data collection and analysis. But while generating massive amounts of gigabytes is fairly easy these days, what’s not quite as easy is knowing what to do with all that IoT data. The data can cover a lot of business territory, and therefore its definitive uses may be hard to ferret out. No wonder nearly 75% of IoT projects are not considered a success.
Our advice: Start with a specific business goal in mind, then figure out how (or whether) the IoT can help achieve it. We take a look at the specifics of that strategy in more detail below.
Data Collection In The IoT: 3 Broad Business Goals
Most companies’ primary challenges center around three areas:
- Increasing revenue
- Reducing operating costs
- Mitigating business risk
1. Increasing Revenue
This isn’t as common as the other two goals, but it does have increasing potential. For instance, some companies are integrating IoT data analytics with their marketing automation platforms to create better user experiences. By tracking the load signature of customers using their products, they’re able to discover patterns in usage. And by pairing IoT usage data with demographic information, companies can learn to better segment their users and target them with specific promotions.
2. Reducing Operating Costs
Cost reduction is an ongoing challenge for many large companies; it’s also the main driver of most IoT data usage projects. Energy is a major operating expense, particularly for manufacturing industries or companies with process-intensive applications running continuously. Collecting real-time data around your company’s daily operations offers numerous opportunities to become more energy efficient. Sometimes companies start with a specific energy conservation goal, such as reducing demand charge, reducing HVAC energy consumption, or reducing power consumption in general (thereby reducing their electricity bill).
3. Mitigating Business Risk
Equipment failure is costly, not only because of the associated unplanned downtime, but also because of excessive spending on new, high-cost machinery. IoT sensors can help reduce the risk of equipment failure by collecting data on the vibrations and sounds associated with certain motors. If you’re monitoring that activity and the pattern abruptly changes in some way—such as the decibel level increasing by a standard deviation—that would create an alert that a failure could be imminent, giving you a chance to address an issue before it occurs.
Implementing the IoT to help achieve one of the specific challenges above is the best way to get started, but that’s not necessarily where it has to end. Business goals evolve over time; plus, the data you collect can sometimes be applied across business areas, allowing for even greater efficiencies and process improvements. We can use the popular business concept of the Balanced Scorecard to explain what that means.
IoT Data Usage From The Perspective Of The Balanced Scorecard
What is the Balanced Scorecard?
The Balanced Scorecard (BSC) is a strategic planning and management system many organizations use to track business performance and align departmental activities with overall company goals. The concept of the Balanced Scorecard came into being in the early 1990s and is today used by more than 50% of large U.S. firms. The BSC framework was introduced by Robert Kaplan and David Norton in a Harvard Business Review article, “Using the Balanced Scorecard as a Strategic Management System”; the idea of incorporating the use of IoT as a component of the BSC was also embraced in the book Analytics 2 Insight.
In essence, the BSC allows leaders to break down organizational goals into four perspectives:
- Financial goals for improved economic success
- Customer goals that will help you achieve a competitive advantage
- Process goals that help meet the expectations of customers and stakeholders
- People (learning and growth) goals that will help achieve the other three perspectives
Even though these goals are broken down into four distinct perspectives, they are uniquely connected. An organization can only achieve its strategic objectives by considering all of these perspectives, each of which involves numerous metrics that reveal whether or not a company is on track for success. Working within the Balanced Scorecard template, IoT devices can deliver some of the necessary data that helps tell the story of your company’s overall performance.Working within the Balanced Scorecard template, IoT devices can deliver some of the necessary data that helps tell the story of your company’s overall performance. Click To Tweet
Examples of IoT data usage that span more than one goal and perspective:
- Real-time data collection on the vibrations and sounds of your machinery helps pinpoint when a piece of equipment is likely to fail before it happens, for the primary purpose of allowing you to plan maintenance tasks based on knowledge about overall equipment health and expected performance. Such data would be helpful in achieving:
- A process goal of eliminating production delays.
- A financial goal to lower maintenance expenses.
- Real-time data collection on air quality measures the carbon dioxide in your building for the primary purpose of providing ventilation on an as-needed basis rather than on a predetermined schedule. This system of demand control ventilation reduces the work for heating and cooling units, saving energy. Such data would be helpful in achieving:
- A financial goal of reducing operational costs.
- A customer goal to support branding initiatives of sustainability (reducing waste).
A Broader View Of Company Performance
With the right analytics platform in place, data collection in the IoT feeds directly into the BSC’s holistic approach, which allows you to manage the business better at multiple levels. Not only can real-time data be used to achieve different goals simultaneously, but it can also help tell the story of your business more completely, sometimes revealing nuances in performance that wouldn’t have been clear otherwise.
For example, consider the relationship between weather and business financial performance. Weather affects consumers’ behavior in terms of the products they buy, where they buy them, and in what quantity; therefore, weather variability can impact any type of business, whether it’s construction, transportation, a public utility, or retail. In fact, research has shown that abnormal weather disrupts the operating and financial performance of 70% of businesses worldwide. To help manage and reduce weather-related risks, some businesses have begun tracking weather data using IoT sensors and comparing it to their financial performance to uncover significant patterns.
Because weather has a big impact on sales, retail companies in particular may find value in environmental monitoring. The way people view certain purchases may be amplified or accelerated by outdoor conditions; capturing that data could impact company promotions, such as moving certain types of inventory to prominent locations in certain types of weather (like moving raincoats and umbrellas to the front of a store if it’s going to rain). The ability to utilize this strategy depends on your ability to tie transactional data from your point-of-sale system to weather details, including hours of sunlight, humidity levels, and cloud and wind presence, for example. All these variables can be integrated with sales details to find possible correlations between traffic flow patterns and environmental conditions.
Another example of how IoT data usage can have a bigger impact than expected: air quality monitoring. Indoor air quality monitoring plays a crucial role in helping to achieve better energy efficiency (read about demand control ventilation here), but it can also reveal the presence of air pollutants that are negatively impacting the health and productivity of your employees. Identifying the root causes of those pollutants and addressing them will help employees do their jobs more effectively, may uncover operational problems that need to be fixed, and will also improve the marketability of your building.
Wondering what your company could do with IoT data?
Data collection in the IoT can be confusing without the help of a partner. At Iota, our specialty is enabling businesses like yours to strategically gather the right IoT data to achieve your organizational goals. We’ll also work to identify other opportunities where real-time data can be valuable, improving your profitability and reducing your risks. If you’d like to talk with us about getting started with IoT data collection at your facility, get in touch today.