The Industrial Internet of Things (IIoT): benefits, innovations and barriers

The Industrial Internet of Things (IIoT) describes the Internet of Things as it is used across several industries such as manufacturing, transportation, energy/utilities, mining and metals, aviation and other industrial sectors. 

The industrial IoT market is estimated to reach $123.89 Billion by 2021

Just like the Internet of Things in general and the Consumer Internet of Things, the Industrial IoT covers many use cases, industries and applications. Initially focusing on the optimization of operational efficiency and rationalization/automation/maintenance, with an important role for the convergence of IT and OT, the Industrial Internet of Things opens plenty of opportunities in moving towards an on demand service model, new ways of servicing customers and the creation of new revenue models, often in unexpected ways.

Several so-called cross-industry IoT use cases are also present in the industrial Internet of Things. Examples include connected vehicles and smart buildings.

Industrial Internet of Things

Industrial Internet of Things in evolution: from operational efficiency to innovation

The core focus in most Industrial Internet of Things deployments in the majority of organizations de facto is still on operational efficiency, along with cost optimization. Or as IDC called it: efficiency optimization and linking islands of automation as key drivers. However, a more holistic approach with additional revenue and innovation goals is needed.

Such a holistic strategy already exists in more ‘mature’ industrial organizations, which have shifted to the business model, service and new revenue opportunity side with tangible results and innovative solutions. They are poised to be disrupters in their respective industries where competition is already intensive and market conditions uncertain and complex.

The power of the Internet of Things comes from the ability to collect a lot of data and convert that into useful information (Bertil Thorvaldson, ABB Robotics)

On the other hand, in order to move up in the IIoT and Industry 4.0 maturity and possibility/opportunity reality, industrial organizations obviously need to start somewhere. Knowing the market challenges and the lowest hanging fruit in many industrial markets it’s normal that in initial stages connectivity in the IIoT space is focusing on a restricted set of goals and benefits. Yet, it’s important to have a roadmap or plan for the longer term. It is not a coiincidence that the holistic challenge we see in the evolution of IIoT is exactly the same as the one we see in the digital transformation of manufacturing, the main IIoT market.

Last, but not least, optimization and automation are not the enemy of customer-centricity in the larger industrial context where speed and enhanced processes are what customers expect.

Industrial Internet of Things definition and major segments

The Industrial Internet of Things can be defined as ‘machines, computers and people enabling intelligent industrial operations using advanced data analytics for transformational business outcomes” (see infographic at the bottom).

In this Industry 4.0 or ‘Industrial Internet’ context (see below), where we essentally find the IIoT as part of an integrated approach, connected data is a key asset and analytics a necessity.

The Industrial Internet of Things is the biggest and most important part of the Internet of Things now but consumer applications will catch up from a spending perspective, mainly starting 2018.

According to IDC’s 2017 IoT spending forecasts, the three industries that are poised to invest most in IoT until 2020 globally (there are regional differences) are all part of the Industrial Internet market.

Manufacturing: the largest IIoT market

The first one is manufacturing. It is also the largest industry from an IoT spending (software, hardware, connectivity and services) perspective.

Manufacturing, transportation and utilities will invest most in IoT in the period until 2020

In 2016, manufacturing operations alone accounted for an IoT spend of $102.5 billion on a total of $178 billion, all IoT use cases in manufacturing combined. With a total spend of $178, manufacturing overall is by far the largest industry in the Internet of Things AND of the Industrial IoT and the segment of manufactoring operations outweighs all other IoT use case investments across all industries, consumer included.

Two other IoT use cases which are important in manufacturing from a spending perspective, on top of operations, are production asset management and maintenance and field service, according to the mentioned research by IDC, released early 2017.

A more detailed overview of the evolutions in the manufacturing IIoT market, including more data, benefits and IIoT cases on our Internet of Things manufacturing page.

More about IoT in manufacturing

 

Manufacturing operations - the main IoT manufacturing use case in 2016 accounted for over 57 percent of total IoT spend in manufacturing
Manufacturing operations – the main IoT manufacturing use case in 2016 accounted for over 57 percent of total IoT spend in manufacturing

The IIoT in connected logistics and transportation

Transportation represent the second largest market from an Internet of Things spending perspective. Transportation and logistics (T&L) firms are looking to move up the value chain with advanced communication and monitoring systems, enabled by IoT.

The global connected logistics market is poised to grow at a CAGR of approximately 30% until 2020.

The transportation market reached an IoT spend of $78 billion and is poised to continue to grow rapidly, just as is the case for the IoT manufacturing market. The main use case in transportation is freight monitoring, good for a large majority of overall transportation IoT spend with a total of $55.9 billion and remaining a key driver in the market until 2020.

If we look at the overall IIoT evolutions in transportation and logistics, we see the growing emergence of a digital supply chain and connected logistics reality, which is at the same time one of the challenges for the manufacturing industry and the T&L market as such as many players don’t have a digital strategy in place and are urged to speed up their digital transformation efforts. As you can read here, about 20 percent of digital transformation costs in T&L will be allocated to supply chain transformation. It’s clear that the Internet of Things plays an important role here.

This is also the case for the four pillars of a connected logistics system as Technavio defined them: IT security, communication systems, supply chain monitoring systems and vehicle/transport tracking. Along with the cloud and analytics, the Industrial Internet of Things is a driver in the connected logistics landscape and freight monitoring leads the pack.

Connected logistics 2017 - 2020

 

4 pillars of a connected logistics system - according to Technavio

IIoT in energy and utilities

Oil and gas, smart grid and plenty of other evolutions and use cases in the energy and utilities market overall are also a main part of the Industrial Internet of Things market.

According to the earlier mentioned data from IDC, utilities alone is the third industry from the IoT spending context, having reached a total of $69 billion in 2016. Here as well there is one area of investment that clearly sticks out: smart grid for electricity and gas, which accounted for a whopping $57.8 billion in 2016.

The Industrial Internet of Things plays a key role in the overall digital transformation towards a digital supply chain in many parts and value chain components of the large ecosystem, which obviously also touches retail/consumer-facing aspects.

However, from the sheer Industrial Internet perspective, smart grids are key in supply and network transmission/distribution. Others include plant effectiveness, maintenance and data-driven opportunities as a result of smart grids and IoT-enabled operations and services.

Utility industry in digital transformation
The Industrial Internet of Things in the digital transformation of utilities

IIoT in other industries

Maintenance and services, enabled by the IIoT are two key areas in virtually all Industrial Internet industries.

Predictive maintenance, data-enabled services and remote possibilities in several areas, from service to control and optimization of operations, also come back in many other IIoT use cases across industries such as healthcare (remote health monitoring, equipment maintenance, etc.), aviation, robotics, oil and gas, mining, metals and more.

The Industrial Internet of Things in context: Industry 4.0 and Industrial Internet

We saw how the initial purpose of IIoT projects typically is to automate, save costs and optimize in often rather siloed and ad hoc ways and how it’s important to have a more holistic view and strategy, whereby there is a shift towards goals of inovation, better customer-centric service offerings, leveraging new sources of data-driven revenues, building ecosystems of value and ecosystem-wide digital transformation goals.

As mentioned, the Industrial Internet of Things enables industries to rethink business models. Generating actionable information and knowledge from IIoT devices, for instance, enables the creation of a data sharing ecosystem with new revenue streams and partnerships.

The usage of the Industrial Internet of Things, within a broader context, ultimately leads from specific projects and ‘smart’ IIoT use cases to connected ecosystems. Supply chains become connected supply chains, factories become connected factories and so forth. In this sense, the connectedness stretches far beyond the simple connectedness – and data-driven results – of devices and industrial assets to a more connected ecosystem, whereby the extended enterprise gains a new meaning.

This is why the Industrial Internet of Things is mainly used in the context of Industry 4.0, which is the term that describes a new industrial revolution with a focus on automation, innovation, data, cyber-physical systems, processes and people. On top of IIoT, Industry 4.0 also is about other technologies; which are related with it.

Industry 4.0 and the Internet of Things - factory example

Examples include robotics, cloud computing and the evolutions in operational technology (OT). In the Industrial Internet of Things, IT and OT need and meet each other. Industry 4.0 further refers to cyber-physical production systems (CPPS) and typical embeds the so-called third platform technologies and accelerators of what is known as the digital transformation or DX economy.

The Industrial Internet of Things is also strongly related with what GE called the Industrial Internet or the third industrial innovation wave and is comparable to Industry 4.0.

In fact, both more or less are the same. Whereas Industry 4.0, a concept which found its roots in Europe (Germany mainly) says we are entering the fourth industrial evolution, the Industrial Internet approach speaks about the third industrial innovation wave. No matter, the exact number, both express the same realities with, among others, machine-based analytics, CPPS (bridging digital and physical) and the essence of the Internet of Things in an industrial context, to name a few.

The Industrial Internet - the third industrial innovation wave - based upon GE SlideShare - see below
The Industrial Internet – the third industrial innovation wave – today mainly about IIoT

Industrial Internet of Things use cases

Despite the link with factories, manufacturing and heavy industries like mining, , aviation, oil and gas, defense, power and electricity and energy overall, the IIoT is often also used to describe several Internet of Things applications outside of the Consumer Internet of Things.

So, de facto it is also used for industries such as agriculture, connected logistics, finance, the government sector (including smart cities), healthcare (hospitals) and cross-industry IoT use cases such as smart buildings in a context of facility management.

Below are a few typical IIoT use cases and business contexts – if we broaden IIoT beyond only manufacturing and the likes

  • Smart factory applications and smart warehousing.
  • Predictive and remote maintenance.
  • Freight, goods and transportation monitoring.
  • Connected logistics.
  • Smart metering and smart grid.
  • Smart environment solutions.
  • Smart city applications.
  • Smart farming and livestock monitoring.
  • Industrial security systems
  • Energy consumption optimization
  • Industrial heating, ventilation, and air conditioning
  • Manufacturing equipment monitoring.
  • Asset tracking and smart logistics.
  • Ozone, gas and temperature monitoring in industrial environments.
  • Safety and health (conditions) monitoring of workers.
  • Smart industrial asset management.
  • Remote service, field service, remote maintenance and control use cases.

The Industrial Internet of Things market: size, growth and impact on economy

The market opportunity of the IIoT is huge. According to IndustryARC research (June 2016), the industrial IoT market is estimated to reach $123.89 Billion by 2021 at a high CAGR, as we cover in our Industrial Internet of Things market state and outlook 2016-2017.

In the graphic below you can also see some forecasts by Morgan Stanley, data on the impact of IIoT on the global economy by Accenture and another forecast from Research and Markets. Leaders in the IIoT space, such as GE, also have impressive forecasts but of course it all depends on what you exactly measure and how you define IIoT.

Size and market impact of the Industrial Internet of Things
Size and market impact of the Industrial Internet of Things – source: Morgan Stanley, IndustryARC, Accenture and Research and Markets.

Industrial Internet of Things adoption barriers: the major challenges

Although the Industrial Internet of Things is poised to grow significantly, challenges remain.

The infographic by Visual Capitalist at the bottom of this article shows a few, as does research by Morgan Stanley and others. An overview of IIoT challenges as perceived by executives.

Challenges and barriers to Industrial Internet of Things adoption - source
Challenges and barriers to Industrial Internet of Things adoption – source

Data integration challenges (and data is the key of the IoT).

Industrial data is complicated for the reasons mentioned in the infographic (based upon IDC 2016 data), of which most also are among the (big) data challenges of our times.

We move beyond productivity and operational costs goals in IIoT towards DX economy value creation, innovation and even disruption goals, leveraging data.

Think about the variety of data source types, big data volumes (certainly in ‘heavy’ industrial applications), varied date frequency and complex data relations. The answer, just like in the big data ‘chaos’ picture overall: intelligent data systems.

Data integration is the number one barrier according to the research with 64 percent of respondents. It’s the eternal challenge of moving from data to business value, which becomes clear in the IIoT context. However, data and more specifically insights and knowledge in ecosystems of sharing are where the future revenue opportunities reside.

Lack of skills (and access to skills)

Another major reason why companies are not ready for the Industrial Internet of Things according to the survey is a lack of skills.

Limited access to the right skills and expertise is a problem for 36 percent of respondents. This issue of lacking skills is not just one of data integration but also one of other skills, which are needed for the IIoT.

A lack of skilled workers also was mentioned in the Morgan Stanley-Automation World Industrial Automation Survey, where 24 percent of respondents cited a lack of skilled workers. There is a lack of highly specific skills in general but at the same time it might also deem necessary to look more ‘outside’ to get access to the right skills. If there is one thing that is clear in this age of digital transformation and of the Industrial Internet of Things, it’s that no organization can do it all alone and networks, ecosystems and platforms of partners are extremely crucial to succeed.

Cybersecurity and data security

By far the major challenge for executives in the survey by Morgan Stanley and Automation World magazine, was cybersecurity and data security.

In fact, when Morgan Stanley posted some of its findings in April 2016, it said that data security was even more of a growing concern for organizations which rely on universal connectivity and that’s of course typical for the Internet of Things which in industrial applications often needs a mix of IoT connectivity solutions, depending on the use case.

It’s why companies who are active in the Industrial Internet of Things as service providers offer hybrid IoT connectivity solutions for industrial applications, ranging from cellular and low power wide area networks to industrial connectivity solutions, fixed and beyond. Important to note: cybersecurity and data security came out as the first IIoT adoption challenge in the Morgan Stanley research, before the end 2016 major IoT security issues and cyberattacks, even if those were not all using the types of devices and connectivity one thinks of in an IIoT context. We’ve tackled these Internet of Things security priorities previously.

Other IIoT adoption barriers

According to the mentioned survey by Morgan Stanley a lack of standardization is also a concern and there is more.

The top 5 of challenges to IIoT adoption, according to the survey, are, respectively, 1) cybersecurity (46 percent), 2) lack of standardization (35 percent), 3) the legacy-installed base (34 percent), 4) significant upfront investments (30 percent) and 5) the mentioned lack of skilled workers (24 percent).

Data integrity ended sixth (23 percent) as the illustration below indicates. Several of these challenges are reported by others too and seem universal.

IIoT adoption: the driving benefits of the Industrial Internet of Things

The main drivers of Industrial Internet of Things adoption, according to research by Morgan Stanley are:

  • Improving operational efficiency.
  • Improving productivity.
  • Creating new business opportunities.
  • Reducing downtime.
  • Maximizing asset utilization.

More drivers in the report and below.

Benefits of IIoT - the Industrial Internet of Things drivers
Benefits of IIoT – the Industrial Internet of Things drivers

5 steps to optimize Industrial Internet of Things projects

The challenges and barriers blocking the adoption of IIoT in manufacturing are pretty comparable to other IIoT industry segments.

And so is the advice which Dell gives to optimize IIoT benefits, mitigate risks and deploy projects (and do approach them as real projects with all the methodologies we know). Below is an overview with comments of the steps Dell advices you to take in an Industrial Internet of Things project.

5 steps to start and optimize IIoT projects - based upon Dell IIoT presentation
5 steps to start and optimize IIoT projects – based upon Dell IIoT presentation

Build partnerships

As already mentioned, partnerships between OT and IT are crucial.

But of course also the business decision makers need to be involved. Go even further and forge partnerships and join forces with parties (internal and external) that might seem less obvious – as is recommended by IDC for any digital transformation project.

Clarify business outcomes and ROI

This sounds so obvious but as virtually all IoT experts will tell you all too often the business benefits are not clear enough.

Unclear business benefits are simply deadly for IIoT projects, as they are for others. An IIoT project starts with an idea, a need or an opportunity that is detected. But the business case needs to be clear.

Smart small

This is very often the de facto approach in Internet of Things and Industrial Internet of Things projects.

Pilots, incremental growth, start small, fail, iterate, go bigger, scale, you know the approach and the benefits with which it comes (unless of course there is a reason to deploy fast if you have the right ecosystem in place).

Security first

While the business outcomes and partnerships with key stakeholders and others are obviously essential, security is at least as much.

Watch the IoT vendors you work with, look at security from an end-to-end perspective as there are so many components involved: from connectivity to devices and connected applications. Security by design and embedded security is a must. And as in all transformational projects, involve security early on.

Architect for analytics

It’s all about (big) data – and what you do with it: the intelligence, the action, the automation.

It’s about the data which you turn into insights, action and automation in your Industrial Internet of Things project and the need to use analytics in order to turn data into these insights, also for data you already might have. Remember DIKW, in IIoT too.

State of the Industrial Internet of Things market

The Industrial Internet of Things and the Industrial Internet

We’ve mentioned the Industrial Internet several times before. Although the term and concept Industrial Internet originally was not the same as the Industrial Internet of Things, today de facto it is used as a synonym.

I you are looking for some of the key players in the IIoT space, the Industrial Internet Consortium can be a good place to start. The term Industrial Internet comes from GE, one of the major players in the Industrial IoT and founding member of the Industrial Internet Consortium.

The latter today mainly is busy with the promotion of the usage of IIoT, which has to be seen in the scope of using data in order to improve operations, enhance service and detect new opportunities. The image below shows the definition of the Industrial Internet.

Industrial Internet definition by GE Automation
Industrial Internet definition by GE Automation

More about its roots, the activities of the Industrial Internet Consortium and the view of the “3rd industrial innovation wave’ as GE saw the Industrial Internet and which is closely related with Industry 4.0 via the button below.

The Industrial Internet

The Industrial Internet (of Things) in practice: real-life examples/cases

As mentioned there are several IoT use cases of which some are specific to an industry and some are cross-industry.

From the optimization of manufacturing operations to predictive and remote maintenance: there are also ample existing Internet of Things deployment examples that show the real-life benefits. Cases are great to help you see the benefits without too much theory.

Manfacturing: a connected services offering at ABB Robotics with IoT

The Industrial Internet of Things enabled ABB Robotics to achieve higher efficiency, enhance customer support and introduce a new connected services approach.

ABB Robotics, a division of automation multinational ABB, manufactures industrial robots for its customers. In this technology-intensive environment, the Internet of Things enabled the company to move from solving issues with robots after the facts to remote maintenance and the possibility to completely transform the company’s services offering.

By building a connected ecosystem of the industrial robots which the company had installed for customers, sometimes in hard to reach places, engineers can analyze issues without having to go to the customer. For customers this leads to tangible benefits in an environment where uptime is of crucial importance. For ABB Robotics the deployment of the Internet of Things – and the platforms to leverage the data and insights derived from it – opened new doors to develop additional services and a web applications that enables monitoring, asset optimization and more.

Read the case

Industrial Internet in the mining industry: the Dundee Precious Metals case

Although 77 percent of mining companies still are at the beginning of their digital transformation journeys, according to IDC (end 2016), several mines already have taken important initiatives in the Industrial Internet of Things.

An example is the Chelopech mine in Bulgaria. It’s an underground gold and copper mine, operated by Canadian firm Dundee Precious Metals. Building upon a modernization, digitization and the implementation of a mobile IP network (with companies such as Sandvik, Dassault Systèmes GEOVIA and Cisco for the communications and network part) an Internet of Everything project helped achieving several benefits.

Among them: an increase of production, real-time maintenance, better and cheaper communication possibilities, fast productivity data (no more paper), better collaboration, fast resolving of issues that have a negative impact on production and thanks to tags which are added to miner’s helmets and to vehicles an overview of who and what is where and when. This doesn’t just lead to insights but also adds to miner’s safety.

Read the case

 

Looking for more industrial – and less industrial – examples of the Internet of Things in practice?

Check out the list on our examples page (with, on top of the above cases, additional examples from companies such as Rolls Royce in aviation, Great Lakes NeuroTechnologies in healthcare, Daimler Trucks, ELM Energy and more).

More about the IIoT

Presentation on IIoT by Accenture

IIoT infographic

The Industral Internet of Things infographic by Visual Capitalist with some of the research data we mentioned in this article.

The Industrial Internet of Things - IIoT barriers and opportunities according to Visual Capitalist
The Industrial Internet of Things – IIoT barriers and opportunities according to Visual Capitalist

 

Image credits:

  • Top picture: purchased on Shutterstock. Copyright: Zapp2Photo
  • Industry 4.0 picture: purchased on Shutterstock. Copyright: Zapp2Photo
  • All other pictures: see mentioned owners in image description and links.
J-P De Clerck
J-P is the founder of i-SCOOP. Born and based in Belgium, he likes to share information, thoughts, inspiration and anything regarding the convergence of marketing, management, customer-centricity, publishing, digital technologies, psychology, transformation, optimization, media and IT - in the hope it serves you. The mentioned areas are those he has been active in since 1992 as a marketer, a consultant, a publisher and a trainer. Connect on Twitter via @conversionation or on LinkedIn.