IoT value mining: How to ensure your business value

Discussing IoT use cases, let's say for a construction site, is fun! The dialog will range between site logistics, monitoring progress, which data is needed for post-project calculations, and many other topics. At the end of the day, everyone feels inspired. After another successful workshop, there is a tiny dark cloud on the horizon: The business value to be created by a potential IoT deployment is still not very tangible. 

Many IoT projects struggle with proving their business value - why is this the case?  

One of the critical success factors for an enterprise IoT project is a proper "IoT value mining" at the beginning of the project. "IoT value mining" is a systematic approach to understand and document the tangible business value that IoT can create for a specific business.  

Where to start? 

One obvious way to get on track is to look at existing, generic descriptions of IoT use case clusters such as "monitoring & tracking" or "remote operations" and discuss their applicability to solve existing problems. Another alternative is to go through the existing business process landscape (e.g., construction site logistics, delivery management, site diary, etc.) to identify the processes that would benefit from IoT enablement. The latter approach is more "painful," but also more structured.  

Step1: Use case crunching 

Nailing down IoT use cases in a tangible manner is more challenging than you may think. The experience of many workshops has taught me to work with simple templates and be very strict in applying them. A template for IoT use case crunching should include four elements: 

1. Problem Statements: Try to formulate short but crisp and clear problem statements. Example: Workers on the construction site are spending a relevant part of their working time searching for equipment or material.  
2. Critical Business Value Parameters: Each of the problems identified should be associated with concrete, measurable parameters. In the case above: How many construction sites, how many workers, how much time do they burn searching for equipment and material. 
3. Functional Use Case Description: How should an IoT use case work to solve a problem? Again: Short, but precise-enough descriptions are essential. Example: Tracking of construction equipment with precise positioning of at least 2 meters. 
4. Involved Ecosystem: Each functional use case description should be mapped with related ecosystem players. Who is the equipment supplier? Who provides trackers and connectivity? IoT solutions typically depend on different players working together! 

Does this sound like rocket science?  

Absolutely not! But it may be more challenging than it sounds to be strict, crisp, and precise in applying such a template. 

Step 2: Adding a timeline 

The best way to scare suppliers and partners away is to build a vision – let's say for a fully digitalized construction site – without adding a reasonable timeline. Applying trackers to equipment and workers may be low-hanging fruit, even if the initial localization precision is more than 2 meters. Within a reasonable timeframe, it may be possible to get the localization precision down to 2 meters, enabling a meaningful correlation of worker and machine movement patterns to understand construction work progress. And a bit further down the line, it may be possible to build a digital twin for each construction site to enable highly efficient site controlling.  

Step 3: Understand the technical requirements of an IoT use case 

IoT use cases will impose technical requirements on the infrastructure, which will drive costs. It helps to define technical requirement parameters, such as battery life, signal latency, data rate, position accuracy, and others, and document them per IoT use, such as in a spider diagram. This has two advantages: IoT use cases and their requirements are easy to compare, and (assuming you have done your timeline in step 2) the evolution of the technical requirements over time is easy to visualize. 

Step 4: Business value analysis 

Time to get down to the point of the whole exercise: What is the business value created by an IoT solution deployment? 

Regardless of what business or industry, IoT business value typically comes in 5-6 main categories. If you are still with me in reading this blog post, it will be easy for you to guess what comes next: The introduction of yet another template – to cover the main business value categories: 

1. Operational cost reductions: These are typically related to work hours or material costs. In the case of our construction site, this could, e.g., by the time spent by foremen or site managers, to manually document construction site progress. 
2. Revenue increase: Increased competitiveness, improved customer experience, and other factors typically lead to increased sales. A critical competitive advantage for our construction company will be the transparency on construction progress they can offer to their clients. 
3. Incident costs: Sometimes neglected, but you can be assured that things go wrong and create follow-up costs. Accidents may happen, equipment may get damaged, penalties may kick-in if targets are not achieved, or timelines are not met.  
4. Production increase: IoT solutions may resolve bottlenecks and enable increased production with the existing assets (sometimes referred to as "Cost of Inaction," CoI). More precise post-project calculations allow better risk management to plan more construction projects per year in our construction case.   
5. Digital service revenue generation: IoT may introduce new digital services to the market, generating additional revenue sources. Our construction company may leverage data from IoT sensors to build digital twins of their infrastructure and sell related insights and services to their clients. 
6. Sustainability impact: Measuring the sustainability impact of business operations becomes increasingly important. IoT trackers will allow our construction company to optimize logistics related to heavy construction equipment, reducing CO2 emissions. 

Do you still remember step 1 (use case crunching) of this exercise?  

If you have been precise in identifying the critical business value parameters, you will now be ready to put numbers behind the business benefits identified above.  

Bottomline 

Careful IoT Value Mining can help to ensure the success of your IoT project. It gives you a methodology at hand to "unturn all stones" and a guiding light to stay on track towards a commercially successful IoT project deployment.  

Would you like to discuss this approach in more detail or share your experience in IoT Value Mining? You can reach me at jens.erler@ericsson.com