Iot Now guide to business transformation by Prestige Media

IoT Now: ISSN 2397-2793

APRIL/MAY 2016 • VOLUME 6 • ISSUE 2

SAP From Things to Outcomes

IoT Now Guide to Business Transformation

INSIDE: Insights into IoT transformation from PwC, Cisco, Flexera, ServiceMax, Accenture and many more

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CONTENTS

Business transformation and the IoT Over the last couple of years, as M2M has slowly morphed into the all-encompassing IoT vision, the term ‘transformation’ has started to become used more and more in all the marketing material, exhibition signage and conference papers that our industry seems to generate by the ton. When it comes to filtering out reality from the hype, things get more problematic. It’s certainly true that huge short and long term benefits will accrue to those companies that get things right. Unfortunately, it’s also true that recent history is littered with many examples of companies who got things wrong, sometimes with devastating effects for their shareholders and employees. Although IoT Now regularly covers the challenges of IoT-related change, we thought that it would also be good to take a more focused look at the IoT and corporate transformation. Firstly, we spoke with Nayaki Nayyar of SAP, a company that’s been around for over 45 years, has 300,000 customers in more than 190 countries, and has an equally long history of applying innovation to help organisations of all shapes and sizes transform the ways that they do business. Secondly, we also approached a number of key players in the IoT sector, both large and small, to get a range of diverse insights into what is a truly multi-faceted issue that involves deeply human factors of perception and motivation as well as the harder, more tangible ones of technology.

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5 Nayaki Nayyar, GM and global head of IoT and Innovation GTM at SAP, shares her experiences of transformation and how to achieve it successfully, based on her early experiences in the petrochemical industry and more recent roles with SAP, where she now also has responsibilities for the complementary fields of machine learning and artificial Intelligence

10 IoT Now’s editor, Alun Lewis pulls together a patchwork series of insights into key aspects of the transformation journey from a wide range of vendors, solution providers and consultants

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TRANSFORMATION NEWS Bosch launches its own IoT cloud

IBM and SAP partner for client innovation IBM and SAP have announced plans to drive the modernisation of clients’ systems and processes. The companies will co-innovate solutions that increase customer value through cognitive extensions, enhanced customer and user experiences, and industry-specific functionality — all enabled with SAP Business Suite 4 SAP HANA software, available on-premise and in the cloud. The two companies will co-locate resources in Walldorf, Germany, and Palo Alto, California, and showcase new solutions to clients in IBM and SAP innovation centres around the world. “The future of business strategy and business value will proceed from the foundational elements of this announcement — cognitive, cloud and the design of consumer-quality

experiences in every industry,” said Bridget van Kralingen, senior VP, IBM Global Business Services. “We’re formalising a complementary set of capabilities to simplify and speed outcomes for those clients evolving to become cognitive enterprises.”

Volkmar Denner, Bosch

“We now offer all the ace cards for the connected world from a single source. The Bosch IoT Cloud is the final piece of the puzzle that completes our software expertise. We are now a full service provider for connectivity and the IoT,” said Bosch CEO Volkmar Denner. Bridget van Kralingen, IBM

Tech Mahindra to build industry-specific IoT solutions with Microsoft’s Azure IoT suite Tech Mahindra has announced plans to build IoT solutions by using the Microsoft Azure IoT Suite. This announcement aims to create a set of new CP Gurnani, customer experiences Tech Mahindra by integrating the entire value chain of client businesses through product conceptualisation, development, manufacturing, supply chain and aftermarket services. Tech Mahindra plans to launch an IoT Centre of Excellence in Bangalore, India, to focus on building solutions across industry with the Microsoft Azure IoT

Suite. The company also plans to launch Customer Experience Centres in the US, Europe, India and China to allow customers and organisations to experience digital solutions with measurable outcomes. CP Gurnani, MD and CEO, Tech Mahindra, said, “We believe IOT-enabled digital business transformation will create significant opportunities in the manufacturing, healthcare, transportation and energy segments for both organisations. We are excited about enhancing our relationship with Microsoft, which will enable our clients to derive significant value in their transformation journey.”

Cisco acquires Jasper Cisco has announced that it has closed the acquisition of Jasper, an IoT service platform company that supports more than 3,500 enterprises worldwide. According to Jahangir Mohammed, founder and CEO of Jasper and now GM of the newly-formed IoT Cloud Business Unit at Cisco, “Our customers are enthusiastic about the combined value that Cisco and Jasper will bring to their businesses. With the IoT Cloud Business Unit, Cisco is moving up the stack to deliver a complete portfolio that simplifies the launch, management and monetisation of IoT services.” He added, “A great example is Telular, a leading provider of solutions for

Bosch is launching its own cloud for webbased services to run various applications for its connected mobility, industries, and buildings businesses. The first cloud is located in Germany.

commercial telematics, security, and bulk storage management, whose TankLink business delivers information on temperature, liquid Jahangir levels and Mohammed, Cisco geolocation for the oil and gas industry. Using the Jasper IoT service platform, TankLink’s remote inventory management solutions deliver the highly-accurate, 24/7 tank level information that is necessary for efficient and cost-saving replenishment decisions.”

“A major factor in the success of connected solutions is their scalability. The Bosch IoT Cloud means Bosch now has the relevant infrastructure and we see this as a major milestone,” added Denner. The Bosch IoT Cloud comprises technical infrastructure as well as platform and software offerings and from 2017 it will also be made available as a service to other companies.

European Commission: Helping European industry to go fully digital In a speech at the start of April, European Commission VP Andrus Ansip, in charge of the Digital Single Market, highlighted the EC’s drive to boost innovation in new growth areas including the IoT. “In the coming days,” he said, “we will present a package of Digital Single Market initiatives designed to achieve this. It will strengthen digital innovation and technology across all economic sectors to make sure that European industry is in a position to compete strongly in digital technologies.” Ansip added, “In concrete terms, this is about: building and expanding infrastructure for data analytics in Europe; giving our businesses interoperable cross-border systems; strengthening trust in cloud services for SMEs; making standard-setting a strategic priority for Europe; and creating a seamless plug-and-play environment for the IoT. Already, over 30 national and regional initiatives for digitising industry have been launched over the last few years, like Industrie 4.0 in Germany, Smart Industry in the Netherlands, and Industrie du Futur in France.

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INTERVIEW

Nayaki Nayyar, GM and Global Head of IoT and Innovation GTM, SAP

From Things to Outcomes: SAP’s Nayaki Nayyar on the transformation journey ‘Transformation’ is one of those awkward words that often gets carelessly thrown around. Everyone knows what it loosely means, but when it comes to putting it into real-world practice – especially in the worlds of business and industry – the devil truly is in the detail… Technology is applied to enhance existing customer relationships, improve product design, manufacture and distribution, and automate previously labour-intensive processes – but doesn’t really change the core of the business model. The scope of the transformation currently being wrought by the IoT is going to be far, far wider. It was with this background in mind that IoT Now’s editor, Alun Lewis, recently sat down with

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This is especially true when it comes to the IoT, the enabling role that it can play in corporate transformation, and the impact that it’s already having on enterprises around the world. Previous iterations and technology cycles have gone a long way to reducing the friction and cost involved in business processes and have already radically changed the ways that we work and live. That said, in many enterprise cases, especially for SMEs, it has largely been a case of ‘business as usual’.

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INTERVIEW

Nayaki Nayyar, GM and global head of IoT and Innovation GTM at SAP, to talk through her – and SAP’s – perspectives on the current sea change underway.

IoT Now: As you highlight, we need new ways of thinking and these often involve new roles, job titles and responsibilities. What’s your take on this aspect of transformation?

IoT Now: Nayaki, before you joined SAP, you’d spent around fifteen years deeply involved in IT in the petrochemical energy sector with Shell and Valero. More than many, that sector has regularly had to undergo huge and often unexpected change as a result of shifts in many socio-economic, regulatory and political factors. What lessons did you learn there when it came to managing rapid change from the IT perspective?

NN: There has to be a specific C-level focus on well-defined outcomes, not just the enabling technologies that are going to get you there. That, in some cases, is going to involve creating a new position – such as Chief Digital Officer - as it’s going to require a different skill set and mind set to that usually needed by, say, someone focused on running an IT department.

NN: Looking back, it was really invaluable experience, understanding where the very real and often gritty world of petrochemical engineering met the abstractions of IT system design – and the almost inevitable room for misunderstandings from both sides. Transformation always has a cultural element as well as the changes to the processes and systems involved and, if companies are to make a successful IoT integration journey that reaches from ‘shop floor to top floor’, as SAP defines it, then these cultural factors are implicit to any programme. Every department within every company has its own views of the world, its own organisational memory and its own semantic shorthand that’s often difficult for outsiders at first to engage with – even if they work for the same company. In the past, these different departments often used to be co-located on the same site and people could interact and share more easily and equitably. Now, thanks to the power of networks, they can be thousands of miles apart, but have to work together even more closely to successfully synchronise often highly distributed activities and resources. One key factor in enabling any transformation involves breaking down traditional silos that segregated people and functions into sharply defined roles. Fortunately, we now have new technology tools that can support these new management processes and structures. The IoT isn’t just about communications infrastructure – it’s about making the transition to a kind of ‘things to outcomes’ way of thinking.

In my experience, that doesn’t always involve having to recruit from outside for this type of role. There’s very often internal existing talent that’s already familiar enough with the company to guide them through what is inevitably going to be a multi-faceted transformation programme. Whatever the recruitment policy, companies usually need some underlying continuity to reassure employees, partners and customers. Entering the IoT is a long term project and that involves having a long term vison for the next five to ten years and, I’ll emphasise, a vision grounded in commercial and achievable reality. IoT Now: So how is this going to affect the kinds of skills sets that are needed? NN: While these emerging job roles will require people able to balance technology and business, new skills and disciplines are also becoming essential. In this context I’d suggest that Data Scientists in particular will be at the top of the hiring tree. With systems that are now capable of sucking in vast amounts of data, not enough attention is being given to the use that can be made of those data pools, lakes, streams and torrents, to use some of the terms that have recently become popular. We’ve not only got to find ways of filtering, storing, classifying and analysing that data, but we also have to find appropriate and mission-focused ways of sharing it with the many different players involved in any product, service or customer and partner relationship. That, in turn, is going to involve applying new visualisation tools to the data to turn it into truly context-sensitive, actionable information that can provide fresh insights to existing ▼

There has to be a specific C-level focus on welldefined outcomes, not just the enabling technologies that are going to get you there

IoT Now Transformation SUPPLEMENT - April / May 2016

problems and identify impending trends before they impact the business model and revenues.

that allow him or her to drill down into the data, spot anomalies and trends, and decrease all the friction and delay usually associated with these processes.

NN: One great example of this is the current shift by product companies to what are called ‘servitisation’ strategies. Whereas in the past, a company might have had a simple pay/buy relationship with its customers, the IoT now makes it possible to transform that into an ongoing relationship where they pay for what they consume in a dynamic real time way. To a certain extent, this has been done already by the PC printer market, where the cost of initial purchase is low, and the initial cost of the device is recouped over a long period. Advances in sensor technologies in particular, both across manufacturing plant and in the finished product, are helping drive this other key strand of technology-based, but essentially commercial, innovation. For example, a car manufacturer – or even a maker of industrial tyres - could move to a ‘mileage as a service’ model, tracking how much wear their tyres are going through and charging accordingly. One of our customers, Kaeser Compressors, a major manufacturer of air compressors, has already successfully made this shift. Firstly, they used IoT principles and our software to improve maintenance and productivity in their factories, and they’re now moving to a ‘compressed air as a service’ business model, rather than just selling equipment. As a result, not only have they lowered their maintenance costs, but they’ve also radically transformed the experience of their customers when they interact with Kaeser. The data that drives these new models – and all the analytic and decision support tools that turn it into actionable information - are also in turn driving cultural and organisational change. The COO no longer has to try and gather information from lots of different sources, all in inevitably different formats, to produce daily or weekly reports in plant performance. Instead, a dynamic and up to date snapshot can be delivered right to his tablet in a board meeting, along with the tools

IoT Now: You touched there on manufacturing which I know is one of your key markets. Can you talk us through the other sectors that you’re involved with? NN: Logistics operations are one major beneficiary of IoT transformations. One big customer of SAP is Hamburg Port Authority, Germany's largest seaport. Both local port and city traffic can be impacted by up to the 40,000 truck trips that happen daily around the site which has around 900 related businesses in the area. Real-time data accessible through the cloud reveals exactly when containers are ready for shipping and receiving. Train and truck routes for incoming and outgoing goods are optimised and better organised. This maximises mobility to efficiently connect all stakeholders and processes, empowering a ripple effect of benefits for Hamburg and beyond. More generically, the IoT helps vehicle fleet owners get the maximum value from their investments by optimising route deliveries in more dynamic ways. One sector where IoT-enabled logistics is also having a growing impact is in the pharmaceutical industry. It’s now becoming possible to track medicines from the point of production to the point of sale and even the point of use. Sensors can be included in the packaging to monitor the temperatures that they’ve been exposed to – a critical issue with many medicines such as antibiotics and vaccines. This transparent tracking process also helps block counterfeit medicines from entering the delivery chain, a major problem in many countries. IoT Now: SAP used the recent MWC event in Barcelona to announce an initiative aimed at the automotive sector where you joined forces with Spanish car manufacturer SEAT and Samsung. Can you tell us something about SAP’s work in this sector? NN: We showcased two connected car scenarios: Digital Key and Park & Pay. With the digital key

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IoT Now: So how can an IoT transformation project actually change the business model?

One sector where IoT-enabled logistics is also having a growing impact is in the pharmaceutical industry

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INTERVIEW

With Park & Pay, by using a smartphone app controlled by the car’s head unit, the driver can find and reserve a parking space

concept, drivers are able to lock, unlock, and even operate their cars from their smartphones. The owner can digitally share the key with someone else, such as a family member or repair mechanic, and can revoke the key when the person is done. With Park & Pay, by using a smartphone app controlled by the car’s head unit, the driver can find and reserve a parking space – and pay for it – in advance without ever having to get out of the car. The SAP Vehicles Network - powered by the SAP HANA Cloud Platform for the IoT means never having to circle the block again for parking. Payment is made via Samsung Pay, which integrates with MirrorLink technology to display data in the car’s head unit. Drivers can authorise payment with the touch of a finger – on a finger imprint pad conveniently located on the car’s central console. This is a new feature from SEAT and not yet available in the market. Samsung Pay is already available in Korea and the U.S. and on its way to Europe later this year. This is also an excellent example of how SAP is working with specialist companies in adjoining sectors as one key aspect of transformation is understanding how real value comes from being able to interwork with other systems and suppliers. For example, we’ve recently formed a strategic partnership with Vodafone and this aims to allow enterprises to connect and manage devices using Vodafone's IoT connectivity platform and to collect and move data from the devices into the SAP HANA platform. IoT Now: So that’s manufacturing and logistics, What are the other sectors? NN: The energy and the utility markets are also embracing the IoT, addressing multiple issues in multiple ways. Given the scale that most work on, even the smallest percentage increase in efficiency and asset and resource management can add up to substantial amounts of money. One of our major customers here is Alliander N.V. in the Netherlands. They’re a €1.7 billion company, building and supporting the infrastructures that carry electricity and natural gas to more than 3.5 million customers, making it the largest electricity and gas network company in the Netherlands. With SAP HANA, it ‘s gathering and analysing massive amounts of data to better maintain assets, optimise its grid, and help customers save on energy bills. In application areas like this, machine learning and artificial intelligence have the potential to deliver even more efficiency gains, especially where natural power sources are involved, balancing generation and consumption cycles in more elegant ways. This is also an area where SAP Edge solutions are particularly appropriate. Devices and sensors can obviously generate vast amounts of data and it’s rarely cost-effective to transport all of this back for central processing. We’re now able to filter and process data closer to the edge of networks,

only extracting and transmitting what’s really needed. IoT Now: Retail and consumer-facing IoT also seems to be getting a lot of attention. What are your thoughts here? NN: This sector’s started talking about the Connected Store concept. Essentially, this involves bringing together a number of complementary systems, processes and technologies to create a connected store, complete with connected products and connected customers. In the process, you can support ever more real time demand-based supply chains, optimise on-shelf availability, increase the flow of product recommendations both by the store and by users via social networking, and, of course, avoiding frustrating out of stock scenarios. In the pharmaceutical and healthcare markets, for example, customers can now generate and share biometric data gathered through wearables, sleep monitors, and other sensors and apps. It therefore becomes possible to link this with particular product promotionlinked activities, such as making healthy menu suggestions or providing more generic healthy lifestyle advice. Finally, a healthy lifestyle also depends on the food that we eat - and here SAP and the IoT are playing their part in what’s becoming known as precision farming. We’ve recently introduced a new digital farm app that allows field sensors to transfer data directly to the farmer - with important information on water needs, moisture level, fertiliser supplies and the right time to harvest in real-time. The app is built on SAP’s platform as a service offering HANA cloud platform (HCP) which enables customers and developers to build, extend, and run applications on SAP HANA in the cloud. The ‘things’ here might be green and alive, but that doesn’t mean that they – and the outcomes of more efficient farmers and our satisfied stomachs - can’t benefit as well! Nayaki Nayyar is the general manager and global head of IoT and Innovation GTM at SAP. During her 20 year career, Nayaki has held various leadership positions at SAP and in the industry. In her most recent role, Nayaki was heading up SAP’s Cloud for Customer Engagement – comprised of sales, service, and social capabilities – and significantly grew the business over 10 quarters. Prior to joining SAP in 2011, Nayaki was CTO at Valero Energy Corporation where she led the Enterprise Architecture and Development department during the company's rapid growth into the largest independent refining company in North America. She started her career at Shell where she gained tremendous industry experience. Nayaki has a Bachelor's in Mechanical Engineering, a Master's in Computer Science, and is a graduate of the Stanford Executive Program.

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EXPERT OPINION

The IoT Now Guide to Business Transformation It’s become a favourite cliché of many at the top in the business strategy world to reassuringly say that change is the only true constant, writes Alun Lewis, editor of IoT Now. As postEnlightenment thinking has progressed over the last few centuries, what was once seen as a divinely ordered, steady-state kind of universe has been replaced, for some people at least, with a far more dynamic and uncertain model. In the process, traditional world views have been overturned, revolutionising almost every field of human endeavour, from science and economics to the arts and politics. Indeed, drill down far enough into the high-tech systems that we now rely on and you’ll soon find yourself in a world of quantum uncertainty that’s very far from everyday common sense.

This kind of approach is becoming increasingly important in the infinitely interconnected environment of the IoT that we’re now starting to surround ourselves with. To take just one often used example from the non-linear world of complex systems: the ‘chaos butterfly’ whose single wingbeat ends up causing a hurricane on the other side of the world. In an IoT world, one small change in only one part of a multidimensional IoT value chain has the potential to reverberate across an entire ecosystem with unexpected and possibly unpleasant consequences.

The past might be another country – but it’s rich with lessons for today We have only to look back fifteen years or so in our industry to see the effects of the dot.com crash. A series of political, economic, social and technological factors came together to

create a perfect storm that wrecked careers, pension plans and companies and damaged entire economies. For any company now looking to exploit the very real benefits of the IoT, the issues of complexity touched on above should present warning signs. According to IDC’s 2015 ‘Global IoT Decision Maker Survey’, 58% of organisations worldwide see the IoT as strategic to their business, while another 24% see the IoT as transformational for their business. However, spend even a short amount of time on the web searching under ‘business failure’ – especially where major IT projects are concerned – and it soon become clear that, while our technology has improved in leaps and bounds, Moore’s Law unfortunately doesn’t seem to apply to human skills in project management. In an excellent 2015 global report from PA Consulting ‘Innovation as Unusual’, the company estimated that in the UK alone, organisations wasted some £64.7 billion on failed innovation projects. Supporting this is a wealth of human anecdote. One recurring theme often seems to be the new VP appointed to ‘transform’ some part of a company. He or she spends a year taking things apart, often with the help of a management consultancy hired for various Machiavellian reasons, before ▼

In academia, an entirely new field has emerged in the last couple of decades that aims to try and address some of these issues – Complex Systems. Implicitly multidisciplinary and exemplified by the work of organisations like the Santa Fe Institute in New Mexico, complex systems concepts try to break down the traditional siloed thinking and over-specialisation that exists in almost every organisation and profession to hopefully give us new ways of understanding the world.

IoT Now Transformation SUPPLEMENT - April / May 2016

So what’s a company to do? Fail to transform and you’re dead in the water. Try and transform and it’s very much a case of ‘here be dragons’, as you step into unfamiliar and possibly hazardous terrain… In the interests of trying to keep our readers aware of both the pitfalls and the possibilities that come with an IoT-related transformation, we thought we’d canvas some views from a range of companies. As there’s an almost infinite set of different topics and industry sectors to consider, we’ve tried to create a snapshot of the many different factors involved in a strategic IoT transformation.

The Telecom Service Provider perspective When it comes to the telecom service providers themselves, the IoT presents the classic threat/opportunity scenario that’s been played out on their turf in a number of different forms since the emergence of IP as the maid-of-all-work protocol in the late 1990s. What should have been a relatively happy symbiosis with the OTT world of content and the web has however turned instead into a relationship that’s often far more parasitic in nature. Scott Puopolo, VP and Global Lead, Service Provider Transformation Group, at Cisco, board member at the Center for the Development and Application of Internet of Things Technologies (CDAIT) at Georgia Tech, and chair of its newlyformed Working Group on IoT Thought Leadership, shares his thoughts on transformation from the telecom operators’ perspectives: “I and my team work very closely with C-level executives amongst the telecoms service provider community and it’s now clear that many of these are now seriously targeting the IoT space in ways that haven’t really been tried before. Obviously, each sees different opportunities to exploit and, while some might have started simply by selling SIM cards, they’ll grow from this to expand their roles much further. While strategies will vary, it’s already clear that many are looking to monetise a far broader range of offerings than they have in this space before, and they’re going to move increasingly to a ‘as a Service’ model as well. “The telecoms world has a number of important cards to play in this space: familiarity with mission-critical service quality and availability, end-to-end security, the ability to routinely handle huge amounts of very diverse data gathered from devices, networks and users and a range of built-in competencies that fulfil many of the IoT sweet spots in what’s an increasingly complex and diverse value chain.

IoT Now Transformation SUPPLEMENT - April / May 2016

“That said,” Scott adds, “telecom operators will have to make changes in their own organisational structures to innovate and adapt successfully. Some for example are setting up dedicated IoT innovation teams outside their core business in a Skunk Works kind of way, and this strategy can help in recruiting, motivating and managing the kinds of people who wouldn’t even think about taking a job with a large corporation – you might call it the Dilbert Effect. Entirely new skill sets are also in demand, such as data and software scientists, not to mention the supporting but equally valuable disciplines of business process design, macro-economics and specialist sector marketing. They’ll also have to learn to work much more nimbly and more effectively with small companies who might have a tactically useful application, but don’t fulfil the same kind of business criteria that large telcos typically look for in a partner. All in all, they already have a great place to start from – and they also have plenty of lessons from their recent past to learn from when it comes to innovating successfully.”

Scott Puopolo, Cisco

Starting with the basics So how do you actually initiate an IoT strategy? Jouni Leskinen, director, R&D at Finnish IoT data analytics company Avarea suggests, “Set-up a team of people who have the knowledge and skills to deliver results, with skills that complement each other and include technical people and business and strategy experts. Once established, the team should consider how the project is aligned with the company’s mission, vision and strategy, and identify a real world business case based on that. “To get practical results, theories should be turned into practice by making a proof of concept or prototype to test the business value. Roll-out happens by gaining small wins with scoped business areas and business units, before scaling out to other parts of the company. Using IoT analytics often requires changes to the company culture and this is achieved by small, fast wins that demonstrate business value, showing how the new way is better than the old and communicating that to the whole organisation. It’s also very useful to find a pilot customer who’s happy to be involved in this.

Jouni Leskinen, Avarea

“To get practical results, theories should be turned into practice by making a proof of concept or prototype to test the business value”

“We’ve developed a six-stage, practical process: interviews - gathering of expectations; use case innovation - identifying opportunities; use case prioritisation - analysing the value and viability of the use case and selection of proof of concept; proof of concept planning; proof of concept implementation; results and next steps.” As far as pitfalls in implementation go, Jouni concludes: “These usually involve trying to do everything internally from scratch and without experienced help; no real world business case and an inability to identify where to start; no management buy-in; lack of quality data; lack of analytics skills; the wrong tools and using Microsoft Excel for everything; an inability to apply the results to business processes; and, finally, immature company cultures when it comes to using analytics.” ▼

being lured away to another company based on their ‘success’. A new VP then has to be brought in to clear the mess up. Indeed, there’s a famous saying in the British Army that after the enemy, the next most dangerous thing is a young lieutenant with a map. In the business world, that map is often an MBA held by someone with little real world experience.

EXPERT OPINION

Mohamed Kande, PwC

“In terms of practical steps, they’re simple: have an idea – draw the idea any way you want – present the idea to real customers – redraw the idea – reshow – pivot/redraw– reshow – pivot/redraw – prototype/Proof of Concept – show and pivot – release the minimum viable product – get feedback – and grow the Minimal Viable Product (MVP) into a complete service or solution. When it comes to implementation, the biggest pitfall is that you’re implementing something that people didn’t want as all technical issues in an implementation are resolvable. Keep building and developing through feedback post implementation. Implementation is the start not the end.”

Follow my leader – with the right people behind Jim Ryan, Flexera Software

“When companies from the ‘internet world’ expand into the ‘industrial world’, they can trigger a paralysing clash of cultures”

As already highlighted, good management and effective and inspiring leadership are essential for successful IoT innovation. Mohamed Kande, Global TMT Advisory leader at PwC shares his thoughts on the topic: “As this transformation – often referred to as the Fourth Industrial Revolution – unfolds, it’s the development of a far more human attribute that most concerns me: leadership. The fusion of the industrial and internet worlds not only requires new algorithms, new supply chains, and new analytical capabilities, but also new types of leader. The differing objectives and speeds of decisionmaking in these two worlds signal the changes that need to happen in the C-suite. “When companies from the ‘internet world’ expand into the ‘industrial world’, they can trigger a paralysing clash of cultures. As the lines between manufacturing and digital capabilities blur, we need leaders who can strike a delicate balance to maximise production and innovation without ignoring human resource factors. As such, recruitment is one critical area. Industrial companies are struggling to attract a new type of digitally savvy talent because of their long established brands. As a result, companies will need to change how and from where they source talent, with industrial companies needing to think

about how to appeal to software engineers – and that involves rethinking their brand, corporate structures, culture and physical locations.” Kande sums up, “We need leaders who can span both cultures. CEOs need to surround themselves with a diverse mix of advisors so they can make decisions both at industrial and internet speeds, but also so they can attract the right talent to prepare for the future. This is a certainly a focus for us now at PwC, helping companies better understand these recruitment and leadership challenges.”

The emergence of Servitisation - the ‘Any Thing-As-Service’ model Jim Ryan, CEO, Flexera Software, says that the IoT is ushering in an era of ‘Any Thing-as-a-Service’. “Manufactured goods,” he comments, “used to be designed and built to perform a particular function. When needs changed, the item became obsolete and a replacement was required. In contrast, IoT goods are intelligent devices replete with data-gathering sensors, powered by software and connected to the Internet. “Indeed, auto-manufacturer Tesla recently proved this when it announced that for US$2500 it was allowing customers to download a software update that would upgrade their existing car with an autopilot feature. In doing so, Tesla solved a problem afflicting most device manufacturers – how to reduce manufacturing costs, uncover new revenue streams, and make the supply chain more agile and responsive to changing market conditions and customer demands. Tesla used software to deliver new products, features and enhancements to existing customers; differentiated its product from every other automobile; created a new revenue stream by monetising its software upgrade; minimised manufacturing costs by offering this functionality via software; and established a deep, direct and ongoing relationship with the end-customer. “Manufacturers however,” he warns, “will have to alter their business models and software monetisation - those licensing and entitlement management systems needed to protect and monetise the software and services revenue streams being created by the device – will be critical for this. Manufacturers must be able to sort out which device features, functions and services a customer has paid for and can therefore access.”

The Golden Goose of Servitisation ? Mark Homer, VP, Global Customer Transformation for field service management company ServiceMax, adds to the debate on this topic: “According to Ashton Business School, servitisation delivers a 5-10% jump in annual services revenue, profits two to three times greater than those on product sales alone, cost reductions for customers as high as 30%, as well as the opportunity to increase service revenues by supporting existing third party or competitor

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Cliff Moyce, DataArt

These suggestions are echoed by Cliff Moyce, global head of Financial Services Practice at DataArt: “IoT projects are no different from other projects where best practice involves the early development of multiple ideas, scenarios and use cases; the rigorous testing of those ideas; and development of strong business cases. It’s important to remember that 80% of IT projects fail – the same for around 80% of new product development initiatives. In my experience none fail because someone did bad work half way through, but because they were doomed from the start. The solution wasn’t fully socialised and tested with genuine potential customers, both internal and external. Luckily, modern product development methods using an agile iterative approach are designed to reduce massively the risk of failure - typically down to 20% - but unfortunately those modern methods are often used in a very old-fashioned waterfall sort of way, so the problem persists.

IoT Now Transformation SUPPLEMENT - April / May 2016

“But shifting business models requires thought and planning,” Homer advises. “Firstly, validate your business model. Chances are you’ll be making potentially more money - but in different ways - which will require a rethink. Machines, products and consumers are now all able to communicate with each other in real time, which opens up a myriad of possibilities for monetisation. Think through the customer experience and look to add or provide value either upstream, downstream or both. By building a better customer experience or creating more viability in an asset’s usage, you’ll not only unlock new value for your customer, but also potentially profit from it. Be careful however not to create vulnerabilities or add unnecessary technical baggage to a customer transaction or service. Opt instead for simple logical value. In my view, reliable and consistent wins over ‘cool’ every time, so don't over complicate things. “Second, look at security. A good reference is the IoT Security Foundation, which is vendor neutral, non-profit and full of expert resources for knowledge sharing, best practice and advice. “Third, take a look at who owns the captured data. We now have laws that cover data capture, data protection, ownership and the protection of personal information. Talk to your legal department, review these aspects, and include them in your end user agreements - clearly state what data is collected and protection and usage rules. “Fourth, ensure you understand the technologies you’re using. Have you designed for quality of reporting and for failure, scalability, reliability? How will you know the sensors are reporting back with valid measurements? It’s really important to test, test and test again - everything from sensor locations, fixings, power supply, communications and circuit redundancy. “Finally,” Homer suggests, “check Industry 4.0 and similar initiatives for ideas. In other words, check for standards and emerging templates or blueprints. Always build trial or proof of concept projects on a small scale, then methodically learn what business outcomes you can drive or improve – but keep a holistic focus on improving value. And consider how are you going to install, maintain, upgrade, retrofit, or decommission your solution, and once deployed, make sure you recalibrate your expectations on a continual basis.”

Servitisation good – but a disruptive force for others? For Narry Singh, MD, Digital Strategy, Accenture Strategy, certain caveats remain, even if the future looks bright: “The Industrial IoT (IIoT) has been heralded primarily as a way to improve operational efficiency, but companies can also use it to find growth in unexpected places. 84%

IoT Now Transformation SUPPLEMENT - April / May 2016

of C-suite decision makers globally believe the IIoT will generate new, service-based income streams for them. However, 73% said their company has yet to make any concrete plans in this area and only 7% have developed a comprehensive strategy. “In manufacturing we’re already seeing smart services becoming a disruptive force, with data from billions of smart, sensor-enabled products being collected and analysed to develop entirely new services. These models pose a serious threat to incumbent manufacturers as new market entrants create innovative, value-added services. Many manufacturers are unprepared for disruption in the manufacturing value-chain, specifically moving from a traditional productcentric model to a service-centric one. 88% of manufacturing executives do not fully understand the underlying business models of IoT, or the long-term implications on their industries. Only 40% indicated that they have developed a digital strategy for IoT.” Singh sums it up: “Whoever controls the smart data wins. The new digital business models being created could see companies gain control of entire platforms, enabling them to become leading suppliers of smart services. These companies will grow by creating digital ecosystems, making their platforms available to third parties who can then develop their own web-based business models. These platforms in turn become even more widely adopted, unlocking even more new revenue sources.”

Mark Homer, ServiceMax

Narry Singh, Accenture Strategy

Who owns the thing – who owns the person? If we’re creating a virtuous – and virtual – new and transformative value chain, managing the identity of millions of connected devices, assets and users will be a growing problem. For Simon Moffatt, director Advanced Customer Engineering at ForgeRock, “The speed at which organisations reap the rewards of the IoT will depend on one critical factor – getting to grips with identity management. Static and portable devices need to communicate, involving Human to Machine (H2M) and M2M identification and interaction. This all adds up to an extended ecosystem incorporating customers, partners, websites, web pages, mobile devices, apps and the cloud that needs to be both secured and interoperable.

Simon Moffatt, ForgeRock

“However,” he warns, “this scramble to monetise IoT services has already resulted in a number of high profile security failures. Just last November, a website went live giving viewers access to more than 70,000 unsecured security cameras in 256 countries. Other recent targets of IoT hacks include smart phones and TVs, thermostats, home routers, refrigerators, medical devices and printers. Unfortunately, legacy identity systems were not designed to manage digital relationships at such a large scale, or handle the security and privacy challenges that come with the IoT. ▼

products. This creates an ongoing relationship with the customer that effectively locks out competitors.

EXPERT OPINION

The impact of European Data Protection Regulation (GPDR) on the IoT Mark Armstrong, Progress Software

Dr. Chris Harding, The Open Group

As the last insight highlighted, privacy is an implicit aspect of security and the forthcoming adoption in the EU of new legislation is no doubt concentrating various minds in the IoT community. According to Mark Armstrong, MD and VP EMEA at Progress Software: “This new regulation aims to streamline and strengthen data protection and data privacy laws across the EU and provide a common framework of reference. Businesses who get it wrong will face up a fine of up to 4% on their global annual turnover or up to a €20m fine per data breach - plus likely severe reputational damage. According to a recent survey, only one in five businesses are confident of achieving GDPR compliance, which suggests that a lot needs to be done. “Organisations purchasing software therefore need to ensure that it is compliant with the new legal framework. This means that privacy policies, procedures and documentation will need to be in hand and readily available to the data protection authorities.” More specifically for the IoT, Armstrong says, “GDPR also has an impact on partner networks and customers. Businesses will need to have a comprehensive overview of their partners’ and customers’ technology, policies and procedures to make sure there are no vulnerabilities, threats or breach risks in the vendor chain. A clear requirement of this is ‘privacy by design’, enforced throughout the systems’ lifecycles. As a result, personal information needs to be able to be deleted across partner software packages or third party data banks. This means privacy controls must be embedded in the end to end product’s system functionality.”

Standards – the IoT building blocks of change “It often helps to look at things from each customer’s perspective,” says Dr. Chris Harding, director for Interoperability at The Open Group, the organisation responsible for developing open, vendor-neutral IT standards and certifications. “For technology standards, the main customers are enterprise and product architects, but how should they choose these for systems and products in the IoT? “With just a quick web search, I found 42 IoT standards - although they’re not all competing with each other. Some provide basic connectivity, such as LoRaWAN for wide area networks. Some, such as the Open Group Open Messaging Interface (O-MI) provide higher-level messaging.

Some are oriented towards particular applications, such as Z-Wave for smart homes. And some, such as the Industrial Internet Reference Architecture, provide standardised descriptions of IoT systems and their components. “It’s this last category that an architect will look at first. In TOGAF®, an Open Group standard, the most popular open architecture development method in use today, the first phase is the business architecture, followed by the data and applications architectures. These phases determine the overall design philosophy, the logical components of the design, and their interrelationships. Only then are the specific communications protocols considered as part of the technology architecture.”

Frameworks, applications, and protocols – choices, choices, choices Dr. Harding continues, “Then there are high-level standards for different design philosophies. The Web Thing Model being developed by the WorldWide Web consortium follows the philosophy underlying the World-Wide Web, for example, while the OPC Unified Architecture follows the philosophy of service orientation. They may - as in both these cases - specify communications protocols that fit their philosophies. “An enterprise system or product may be designed for a particular application area. For instance, there are several standards for smart home devices, some ‘owned’ by particular corporations, others by neutral consortia, and business rather than technical factors will most likely determine an architect’s choice. Other areas, such as healthcare, do not have strongly established vertical IoT standards, and choice here involves both business and technical considerations. “Additionally, many devices will not connect directly to the Internet but instead communicate with internet-connected controllers using protocols such as I2C or NFC. The choice here will be determined by application requirements and available components. Connections to the Internet might use GSM, WiFi, or wired Ethernet, depending on physical location, power availability, and cost. Design philosophy will probably affect the choice of higher-level protocols, such as MQTT or HTTP, though resource constraints might suggest CoAP. When it comes to making informed decisions, an IoT architect must understand standards and their advantages and disadvantages in different situations.”

Still having visions? Treatment is available For Andrew Yeoman, CEO at IoT solutions vendor Concirrus, there will be two types of business in the future: those that leverage the benefits that IoT has to offer and those that used to exist. However, he says, “According to Gartner’s 2015 Hype Cycle curve, IoT is right on the brink of ▼

“Understanding context therefore becomes a key requirement. Does the customer usually log on in Norway? Do they have a wearable device that is allowed to access their health data? Organisations will also need to prioritise privacy and consent when sharing their users’ personal data.”

IoT Now Transformation SUPPLEMENT - April / May 2016

plunging into a ‘trough of disillusionment’. But whether that plunge takes place, and how long IoT remains in a state of disillusionment, remains to be seen. One of the major challenges with the IoT is how do you sell a complex new technology to businesses when they may have a hazy or distorted understanding of what IoT is, let alone the difference it could make. “Looking at the IoT today in all its chaotic, nascent glory we can see that businesses struggle to articulate their offerings. Hundreds of individual ‘IoT providers’ talk in detail about specific technologies and applications, sometimes using impenetrable jargon and specialised nomenclature that bears little or no relation to the real world. Our focus therefore has to shift from the ‘how’ to the ‘what’: look at what a technology is going to do and the value that it provides to customers, not how it works. “The second major challenge is one of implementation. Iterative development and stageby-stage on-boarding will be key, with CEOs and CTOs being confident that their existing data and software architectures can continue to be utilised in this road map. Positioning IoT adoption as an act of creative destruction is unlikely to win many converts within large corporations - the need to justify sunk costs will be too strong. This however may be a more viable strategy amongst the startup community.” “Finally,” Yeoman concludes, “if businesses and organisations start incorporating live data into their current operations, processing this data to make more intelligent decisions that drive efficiency, this will require fundamental attitudinal change. Organisations that adopt this way of thinking will progress faster than those that do not.”

And the wheel turns again And so, after a rapid journey through just a few of the issues involved in IoT-related transformation, we’ll close by returning to the subject of complexity, highlighted at the start of the article, with some shared insights from Wael Elrifai, director for Enterprise Solutions EMEA, at Pentaho, the big data and analytics company recently acquired by Hitachi. According to Elrifai, “The need to overcome complexity became a cliché decades ago. Today’s companies seek to profit from chaos, whether they call it a ‘journey,’ continuous improvement or all-out transformation. People, process and technology transformation models from the eighties, like management by objectives, project management and relational data are giving way to more fluid, scalable and interconnected approaches like integrated business planning, agile and distributed file systems – and, yes, the IoT. “Since the IoT is part physical, let’s consider the second law of thermodynamics which says that any spontaneous new process increases the overall disorder of the universe. As we strive to create order at the macro level, systems get more

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complex at the micro level. Jeremy England, an assistant professor at MIT, applied this law to hypothesise that under certain conditions, matter inexorably acquires the key physical attributes associated with life. “In this context, our drive to connect and make smarter all the physical objects in our chaotic, increasingly complex world is natural - inevitable even. Whether it’s predictive maintenance, a smart city initiative or a factory of the future, if your organisation is embarking IoT journey, here are ‘5 Cs’ to consider:

Andrew Yeoman, Concirrus

“Connections that are about capturing data from sources like sensors, controllers, inspection and maintenance logs. These generate massive data volumes whose storage and computational tasks are well suited to Big Data infrastructures like Hadoop. Taking a simple example of a train door, this is where we capture the state of door, ‘open’ or ‘closed’. “Then there’s the Conversion of data to information, where useful data is mined from a large body of information, much of which is noise. Data must also be synthesised or blended with other relevant data. In the train door example, we need to know whether a passenger has pressed the ‘door close’ button, along with the state of the door.

Wael Elrifai, Pentaho

“Following this comes Centralisation, where data is stored virtually or physically in one place, like a data lake. Only crucial events data needs to be stored - not all the noise. Our train doors, for example, might generate billions of ‘door closed’ signals, but we only need to store the failure case. “Then there’s Cognition - customising analytics to understand systems and their interactions – such as high temperatures stopping our train door closing. A further correlation could be that our door was produced in 1987 in a specific factory. Insights acquired over time certainly support improved decision-making. The train operator, for example, might decide after four hot days to decommission the whole carriage and schedule maintenance. Machine learning, statistical analysis and data mining techniques all help us perform intelligent analyses on data and start to bring ‘self-awareness’ to things. “Finally, there’s Continuous improvement, making the move from the digital world back to the physical and implementing resilient systems that make corrective and preventive decisions. Our train door learns, “The way I’m operating now, I’ll fail in 3 weeks. But, if I send a signal to the humans to lower the air temperature in the carriage by one degree, I won’t fail for another seven months. “So, progress in the IoT will mirror organic life,” Elrifai concludes. “We establish order by creating pre-conditions and data and let machine learning handle the evolution. As this happens, society should become healthier, safer and happier - the ultimate goal for IoT!”