Beyond Industrial IoT: moving toward post-digital industrial architecture

Industry 4.0 is the buzzword on everyone’s lips in the digital transformation market in recent years, beyond a doubt. In fact, a number of studies have highlighted the potential benefits, from a deeper understanding of internal production processes to a total reconfiguration of traditional business models with a drive toward new ones, such as servitization. In the vast majority of cases, at the heart of Industry 4.0 initiatives lies the Industrial Internet of Things (IIoT), a set of technologies which ultimately serve to collect data from a huge number of interconnected production systems and use these inputs as catalysts for system control and performance enhancement.

Today more than 60% of manufacturing companies around the world have invested in IIoT, and it’s than likely that in the coming years the budgets earmarked for similar initiatives will grow even more. But despite all the promises and investments, the potential of these technologies is still not fully recognized or widely applied, a fact that leaves market analysts disconcerted.  What’s going on here?

The slow pace may be due (at least in part) to pilot purgatory, as we mentioned. To explain, back in 2017 Cisco reported that among the firms that had deployed IIoT projects, many saw worse-than-expected results.  Later various consulting companies (Capgemini, McKinsey and Deloitte to name a few) confirmed that an ample percentage of IIoT projects (around 75% in fact) languished in the pilot phase for over a year (and even over two for 30%). Hence the term pilot purgatory: the not uncommon occurrence that IIoT initiatives remain in limbo, stuck between the testing and operational phases. The fact is that despite the potential advantages, IIoT has earned a reputation for being complex technology that’s difficult to adopt and even more difficult to exploit.

The report “Beyond Industrial IIoT: The Post-Digital Industrial Architecture,” published by DEVO Lab at SDA Bocconi, aims to answer various questions pertaining to this fascinating new conception of digital transformation. We can sum up the purpose of our work in four themes: to describe the current status of IIoT; to understand the actual benefits; to analyze the key challenges that are stopping manufacturers from adopting IIoT; to provide companies with recommendations and guidelines to face each of these challenges.

We carried out our research in four phases, and collaborated on the first one with the University of Applied Sciences and Arts of Southern Switzerland (SUPSI). Here we examined the technological components of an IIoT system, delineating the similarities and, more importantly, the differences with respect to industrial automation architecture. It is the differences, in fact, that make IIoT a completely new model, rather than a simple technical advancement.

Based on the classification we developed in this first phase, we moved on to do a fine-grained analysis of the benefits and challenges of IIoT. To pinpoint these aspects, we used two distinct methodologies. For benefits, we opted to do desk research drawing from a sample of business cases of IIoT implementations that were deemed “successful.” We then reclassified the resulting data utilizing a modified version of a reference framework “nine digital domains for digital transformation” (Westerman, Bonnet and McAfee, 2014). In line with this approach, we divided the benefits of IIoT into three macro-streams: improving customer experience (CE), upgrading operational processes (OP) and renewing business models (BM). What emerged from this second phase was that among the benefits of IIoT which are typically cited in the literature, the ones that materialize in practice primarily center on OP, and far less frequently emerge in the other two spheres.  Below is a list of the specific advantages that companies find after deploying an IIoT initiative.

• OP: higher process efficiency (reported in 48% of cases)
• OP: enhanced process transparency (48%)
• OP: higher process effectiveness (35%)
• OP: improved decision-making processes (26%)
• OP: improved quality control systems (20%)
• OP: improved plant and waste management (15%)
• BM: easier access to servitization (12%)
• OP: increased workforce safety (10%)
• OP: empowered workforce in performing daily tasks (8%)
• CE: more opportunities for customized production (4%)

As far as the challenges, on the other hand, which often prove to be the most critical factors to assess in a new technological application, we decided to take a more direct approach. We spoke directly with experts in the sector from member companies at DEVO Lab, and asked them to share their experiences with IIoT implementations. By doing so, our research enabled us to shine a light on various critical areas, both technical and organizational. As for the first, our findings underscored six primary challenges: the inability to manage a higher number of sensors in the company; the lack of interoperability among various components of the IIoT architecture; the difficulty in balancing edge/cloud computing requirements; insufficient broadband capabilities in production plants; a lack of integration among IIoT platforms from different providers; greater cybersecurity risks.

Our research also revealed that the pilot purgatory phenomenon is not strictly linked to technical challenges, as substantial as these may be. Far more important in practice are organizational challenges, which we grouped into seven main areas:

• the need for greater integration between IT and OT teams
• little or no involvement of the Information Security team in the initiative
• scarcity of IIoT knowledge or skills on the job market
• a lack of appropriate change management tools to support the initiative, in particular in SMEs
• no clear value proposition for IIoT
• no consistent development or deployment strategy for IIoT
• the complexity of the IIoT platform provider market

For the challenges listed above, our study sets out a series of guidelines and suggestions to deal with each one. Although our recommendations are not exhaustive, they can serve as a starting point, a way out for companies that currently find themselves in pilot purgatory. 

Our study “Beyond Industrial IIoT: The Post-Digital Industrial Architecture” contributes to the efforts of DEVO Lab to give companies an accurate map for navigating the world of IIoT. Beyond clarifying what IIoT is and what makes it different from traditional automation, we want this report to serve as a compass, guiding companies that are contending with the challenges that come with this new model, with the full knowledge of what they facing. But more importantly, we hope our work will help companies exploit the concrete benefits of IIoT.

The complete research report is available free of charge to all member companies of the DEVO Lab at SDA Bocconi. For further information, contact devolab@sdabocconi.it. Part of our research is also included in the proceedings of the 55^th HICSS conference, published at the following link.