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Rethinking the Manufacturing Organization in the Age of IoT

Posted By Jeff Moad, May 12, 2015 at 11:52 AM, in Category: Transformative Technologies

BOSTON--We all know the Internet of Things (IoT) will dramatically change the products we manufacture and use, making them smart, connected, and, ultimately, more autonomous.

But what impact will the IoT and all of those smart products have on the cultures and organizational structures of the companies that manufacture them? It will be significant, said Michael Porter, an author and professor at the Harvard-based The Institute for Strategy and Competitiveness, in remarks to the LiveWorx 2015 conference hosted here last week by PTC. And, said Porter, the manufacturers that manage to gracefully navigate those often challenging changes may find a significant competitive advantage.

The IoT era, for example, will require much tighter and more agile collaboration between what historically have been stove-piped organizational functions such as IT, engineering, R&D, service, and manufacturing. That’s because the IoT has the potential to change the very nature of manufactured products and how they must be designed, engineered, manufactured, and serviced.

Take a smart, connected aircraft engine, for example. Every day it will generate an overwhelming stream of data which can be used to tell its manufacturer everything from how the product is being used and how well it is performing to and when and why it might need maintenance, service, or replacement.

And slices of that data could be invaluable to just about every function in the manufacturing enterprise. The marketing and sales organization could use it to better understand usage and demand patterns. The R&D and engineering functions could use it to better understand product performance and to rapidly refine future designs. The service function could certainly use it to better schedule and perform service and even to predict when service might be required. And the manufacturing function could use it to better understand the cause of quality exceptions, quickly tracing them back to specific plants and pieces of equipment which, themselves, are more and more smart and connected.

But who owns all of that data, and who will be responsible for creating the IoT infrastructure that, increasingly, will become a critical operational platform supporting information-based service offerings? Should it be the IT function? The service organization? Sales and marketing?

Or, as Porter suggested last week, should manufacturing companies create what he called “Unified Data Groups,” led by Chief Data Officers, that would be tasked with turning the mountains of data generated by IoT infrastructure into competitive assets that could truly be exploited by existing business units?

“[IoT] is going to change a lot about how we do our work inside the company,” said Porter.

Or maybe manufacturers will look outside their four walls and create new types of partnerships that will help them manage and govern all of that IoT-generated data. Heavy equipment manufacturer Caterpillar is doing just that. Last week the company announced it has invested in analytics software provider Uptake which will help manage what Caterpillar CEO Doug Olberhelman described as the “quintillion bytes of incoming data” that are now being generated by the company’s smart, connected products. Uptake will help Caterpillar turn that data into predictive insights that can be used by the company and its customers.

Whether manufacturers decide to graft the data management function onto their existing organizational structures, set up new centers of excellence, or partner for expertise, the structural changes forced by IoT are likely to be, at least for a time, a source of conflict.

“At a lot of companies, when you ask who is in charge of IoT, everybody raises their hand,” said Sayed Hoda, chief marketing officer at IoT analytics provider ParStream, at last week’s PTC LiveWorx event. “At others, nobody raises their hand.”

But IoT data governance isn’t the only issue that will bring organizational change to manufacturers. IoT will also require much greater and more agile collaboration between manufacturing enterprise functions such as engineering, R&D, service, and IT. Using the aircraft engine example again, R&D and engineering, as they design the next generation of smart, connected products, will need help from the service organization to understand what sensors will be needed and what data must be collected. And they will all need help from the IT function in creating the cloud-based infrastructure that will be needed to support all of the new IoT-generated data and IoT-enabled services.

The IT function, then, will need to become a partner in enabling core, IoT-enabled products and features, not just a provider of back-office services. But will the IT function be up to the challenge?

And IoT will put new pressures on the Human Resources function within manufacturing organizations. Already scrambling to fill critical engineering jobs, HR will have to rethink how it does its job in the age of IoT. That’s because, said Porter, IoT will require a new generation of manufacturing employees with a unique combination of not just mechanical and software engineering skills but also data science skills and knowledge of domains such as post-sales product service and support.

“Very few people are trained in this way today,” said Porter.

Despite these looming organizational challenges, many manufacturing organizations are moving ahead with their first IoT implementations. Many of those represented at PTC LiveWorx aren’t yet ready to use IoT to control products in the field or to enable machine learning and autonomy. But many are already using IoT to monitor product performance in the field in real time. They included:

  • Medical equipment maker Welch Allyn, which has launched Partners in Care, an IoT-enabled service that performs remote diagnostics of medical devices being operated in hospitals;
  • Stryker, another medical equipment maker that is using IoT to monitor the usage of medical power tools and to recommend field maintenance to customers;
  • CynoSure, Inc., which is using IoT for remote diagnostics and as the basis for an ensured uptime, pay-per-use billing model;
  • Yankee Candle, a consumer goods company that is using IoT to monitor the retail environment through which its products are sold.

As such manufacturers build on these early IoT initiatives, they will face increasing challenges to update their cultures and their organizational structures. The manufacturers that are able to navigate the organizational challenges will enjoy a significant competitive edge. 

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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