Never mind the tech, it’s all about the money
An increasing number of companies across many industries are adopting IoT, but their reasons for doing so are very different, writes Peter Dykes. One of the primary reasons, it seems, is making cost savings through efficiencies such as monitoring remote plant or tracking assets as they move around the world. But should they be focusing more closely on generating new revenues?
A lot of people seem to think so. So far as digitalisation in general is concerned however, many companies do seem to be aware of the need to think in terms of revenue growth through investment in technology, but a significant proportion are having problems in achieving that end. While there are distinct advantages to using a new technology to make a business more efficient, it’s important to make sure the initial investment can be recouped. This is particularly important with IoT because, so it would appear, it is not widely understood by its potential beneficiaries.
Peter Coleman, a partner at consulting firm Simon-Kucher, says a recent cross-industry survey conducted by the company, which included IoT deployments, found that 81% of those questioned had made investments in digitalisation in the last three years. When asked what they were trying to achieve, 21% said they were trying to reduce costs, a similar number said they were looking to increase revenues and 54% said it was a combination of both. However, taking all those who said they were trying to increase revenues to some degree – 75% of respondents in total – only 23% said they had seen any degree of top-line impact. Coleman puts this down to a lack of adequate planning.
“It may well be that someone has set themselves a goal without clear targets,” he says. “But we know from the same survey that unit cost reductions are not realistic and that they will stay the same or increase. So we’ve got a dichotomy where they know the opportunity is on the revenue side, they know the cost position isn’t likely to get better and may even get worse, they know they want this stuff to affect the top line, but what they’ve done so far hasn’t been sufficient.”
Of course, the situation that Coleman describes could just be because many IoT deployments are just at the proof of concept stage. Jonquil Hackenberg, the head of Advisory Practice at Infosys Consulting believes that many companies are just dabbling in new tech, just to see how it can be used in different scenarios, although there is a good case for profitability in the future. This is especially true in things like proactive, automatic stock reordering ordering where a company may make more sales as a result. “There is a massive opportunity for a return on investment, increasing revenues and introducing new lines of business,” he says. “However, once they stop dabbling with proof of concepts and start working out the end-toend consumer journey they’re trying to create, that’s when it will stop being […]