Internet of Things and Industrie 4.0: A chat with two IBM experts

by Madalina Irimia & Richard Cave

These days, we hear a lot of hype about the Internet of Things. Attracted by the innovation potential and revenue possibilities that IoT brings to the table, business leaders are increasingly interested in this topic. Consumers are no strangers to the world of interconnected smart devices; they already understand the value these “things” bring to their lives. By 2020, more than 20 billion connected objects will be in use worldwide, 13.5 billion in the consumer sector alone. While everybody seems to agree on the benefits of adopting these solutions, it’s also undeniable that there are still challenges and some gaps in understanding and building an IoT strategy. According to a 2015 Economist Intelligence Unit study, only 38 percent of Chief Executive Officers fully understand the term “Internet of Things.”

To provide more clarity on the topic, we looked within IBM’s own backyard.  We wanted to know what our own experts are thinking about the business motivations for implementing IoT solutions. What are the key challenges companies face? Which industries have the most to gain from IoT transformation?  How is IoT going to change customer engagement? To answer these questions, Richard Cave and Madalina Irimia from the IBM Center for Applied Insights spoke with Andreas Schoenknecht and Joerg Grafe, senior IBM market analysts with rich expertise in the IoT and Industrie 4.0 fields.

Listen to the full podcast here:

Highlights from our conversation with Andreas and Joerg

Why is the Internet of Things a game-changer for businesses?

The Internet of Things has the potential to be a huge catalyst for business change. Companies need to think about it like a powerful business transformation resource that combines a multitude of elements. Although it all starts with data captured using sensors and devices, and open platforms and analytics are key elements, digitization and transformation are essential to realizing the full benefit. Winning this game means understanding the potential of new digital services – the next step in the evolution of business.

Andreas highlights:

It’s not only about the IT topic itself, about connecting and analyzing; it is really an upcoming business transformation that we see. And this is why I think IoT is a game-changer.  IoT podcast social tile business-change quote VFWith IoT, industries merge together.

Our experts believe that the Internet of Things is not necessarily more transformative for some industries than others. IoT solutions can be implemented by all industries with the potential of changing the way they operate in a quick and radical manner. In fact, the IoT is often the disruptive element that spurs industries to merge, borrow elements from each other and innovate markets.

Andreas discusses:

Think about the big changes that we have seen over the last one or two years. Think, for example, about Uber. This a completely disruptive game-changer for the entire transportation market. This is definitely a huge change that we see there…but the point I want to make here is that it’s not about transforming an isolated industry, but it’s always a combination of industries in specific use case scenarios.

Business of different sizes face different challenges, but they can all see value from the IoT.

The Internet of Things is able to address both large and small company needs, with the benefits from the implementation of IoT solutions being very independent of their size. However, when it comes to the main challenges businesses face when adopting IoT systems, size does matter: smaller companies tend to struggle with technical hurdles. They often have to bridge a skills gap, and implementing with a small workforce can be difficult. At the opposite end of the spectrum, big companies are more focused on clarifying their strategy for the IoT. Their main challenges revolve around the integration of these solutions into their business – understanding the scope of transformation that’s required and how their business model may be disrupted.

Andreas highlights:

You asked if “only 38 percent of CEOs fully understand IoT” ranks low or high, so my answer is very low. If you think of IoT like a real business disruptor and transformational element, then at least 99 percent of the CEOs should know what IoT means for them and for their industries.  IoT podcast social tile 99 quote VFJargon alert?!  Internet of Things and Industrie 4.0 are closely connected

Even though technically there is a difference between these two notions, the IoT and Industie 4.0 terms are blending together more and more. Historically, the IoT focus comes from the United States, and the idea behind it was to link assets digitally, transform the business and bring profits. The Germans, Japanese, Italians and French, strong in the manufacturing field, brought a different angle – business and process optimization. The notion that they had was Industrie 4.0, the next evolutionary stage within industrial production.  More can be found in a German study on Industrie 4.0.

Joerg discusses:

It is good to know the different definitions because it is necessary to get on the same level with the people whom you speak to.  If you want to speak to Bosch, they would like to speak to you about the digital factory.  So you must talk about digital factory and forget about just focusing on the technical view, and also bring up the transformational point and business models. So I think those terms that have been sharply defined tend to merge into each other.

The Internet of Things brings companies and consumers closer

Whether we’re talking about transportation, consumer packaged goods, electronics, apparel or other sectors, the Internet of Things has the power to break the wall between producers and consumers, to enhance communication and drive customer engagement. Companies that traditionally had no chance to be in contact with their end users can now understand how their products perform, access data about their consumers in real time, and analyze their preferences and buying behavior. Consumers can also obtain real-time data about their orders, favorite products or services. As a result, companies can react faster, engage with consumers and implement adapted solutions. With that, IoT can bring big, brand new opportunities into the game.

Andreas discusses:

IoT gives to many companies that haven’t been in direct contact with their end-customers the opportunity to engage with them. Think about all those CPG manufacturers. Traditionally, they had almost no chance to get out to their end clients because there was always this very strong and powerful retailer in between.

IoT quiz VF

Do you agree with Andreas and Joerg about the potential impact of the IoT?  Join the conversation by adding your comments below.

 Talking Insights” is a podcast series aimed at exploring business and technology topics through candid conversations with industry experts. Tune in to learn about everything from social business to startup partnerships from the people who are actually doing it.

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