Harnessing the power of the internet of things

In a connected world, machines will report on their own activity and the potential for data collection is endless. The challenge for businesses in the age of Industry 4.0 will be identifying and capturing the most important data...and then putting it to good use.

Farmer presses buttons on a digital screen while sitting in a tractor

“Smart, connected things”

A massive transformation will soon affect every aspect of our professional and private lives. Millions of structures, including factories, homes, and energy and transport systems, together with all the products and machines they contain, will be interconnected and responsive in real time through what is commonly known as the internet of things (IoT) or Industry 4.0.

“The cornerstone of all these developments is smart, connected things,” says EY’s Dr Christoph Kilger. It is not the internet that is changing, he says, but the things themselves.

For some years now, products such as washing machines have had the sensors and software to gauge how well they are functioning, and when and why they are developing a fault. But the power of such data is only unleashed once products can connect and communicate — a revolution that is now gathering pace.

From reactive to predictive mode

A half century ago, reactive maintenance — waiting until a machine broke down and repairing it — was the go-to strategy for machine upkeep, explains EY’s Frank Müller, Executive Director Manufacturing and Maintenance for Germany, Switzerland and Austria. “Then we moved into preventative maintenance, where you would repair machines after a certain number of kilometers or a set time interval."

But today is an era of predictive maintenance. "We can act before problems arise," Müller says. "Sensors are cheaper and deliver much more sophisticated information, so you can initiate maintenance before breakdowns occur.”

The “system of systems”

The implications of machines being able to “report” their activity has implications far beyond ordinary maintenance. “We will move to a ‘system of systems’,” says Kilger.

A tractor, for example, might connect to other farming equipment, such as harvesters, to form a system. "But then that system might also go on to connect with other systems, such as weather forecasting, soil analysis, and seed and fertilizer management systems," Kilger says. The result is a fully connected agriculture ecosystem that causes disruption to traditional business models.

Responding to disruption

How should companies address such disruption? Kilger says they must decide what data is relevant to their business model and what to do with it. Such decisions may prompt a whole string of questions, such as: what additional functions in my product or in the cloud will be useful and relevant to my customers? Do I want the software to be open or closed? Do I develop software internally or outsource it? Could my business model also include selling data on to other providers?

The answers to these questions may end up radically extending existing business models or inspiring new partnerships, collaborations or, in some cases, competition. For example, a fertilizer company knows exactly how to fertilize soils and maximize crop production in every part of the world, but a farm machinery manufacturer will have valuable data relating to when, where and how much fertilizer was actually applied in specific situations.

So whose data will prove more influential?  “It’s not yet clear which party will win out in a situation like that,” Kilger says.

Capturing the right data

What industry needs, however, is not necessarily more data but the better use of data. Müller says that only then will the benefits of Industry 4.0 materialize: the ability to maximize productivity, predict and prevent machine breakdown, manage product life cycles and design smarter parts. But he warns that some companies are failing to realize the full potential of the internet of things because they are capturing huge volumes of data without considering what it is for.

Companies must avoid this pitfall and ensure they capture the benefits of operational efficiency, cost efficiency and lead time, Müller says. “I would advise companies to think about what data to capture, at what frequency and for what purpose." He adds that businesses should concentrate on addressing the vital few defects that will really make a difference. It's a better alternative to gathering terabyte upon terabyte of data that has only questionable value.

Amassing information can be helpful, but not at the expense of common sense.