The Pursuit of Manufacturing IoT Commercialization

February 15, 2018

Steve Pillsbury, PwC Strategy & Operations Consulting Partner

Monetizing the Industrial IoT

02.15.18

www.pwc.com

PwC Advisory

• Has the Industrial IoT become

mainstream for businesses?

• Is anyone making money

with IIoT?

• How does the journey start

(and accelerate)?

Our discussion today

“Has the Industrial IoTbecome Mainstream for

Businesses?”

A: Yes.

• Growth

• Adoption

• Connect & Optimize

PwC Advisory

38% of manufacturers now offer

IIoT-driven products and services

48% are currently in the process

of developing them

Meanwhile… nearly 90% are using or

exploring the use of IIoT tech to

enhance operations

5

For US manufacturers, IIoT adoption has already mainstreamed

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6

8.4 billion connected things in 2017

(about one-third for business or

industrial application; two-thirds for

consumer products)

20 billion by 2020(Source: Gartner estimates)

Venture capital investment hit $2.5 billion

in US companies developing IoT products

and services, double from 2012

(Source: PwC/CBI Insight MoneyTree report data)

The Industrial IoT ecosystem is growing swiftly and widely

7%

32%

42%

42%

49%

61%

61%

Add’l Revenue /

attractive ROI

Competitive

Pressures

Commoditization

Pressures

Customer

Demand

Other

Disruptive

Competition

Market

Expansion

IIoT is not simply just another technology; it’s perceived as a driver of new sources (revenue, cost-savings) of profitability

Competitiveness and ROI are top

motivators for IIoT adoptionBased on PwC / MAPI Survey Results

7PwC Advisory

PwC Advisory

The buzzwords have actual meaning – “Big Data” and “Internet of Things” represent truly transformational possibilities for businesses

Data Available

From Everywhere

Data Captured / Analyzed

in Powerful Ways

Innovations and Solutions

Built from The Data Insights

Easy, Affordable Access to

Data, Solutions, Platforms

Solutions

Platform

External Company Solutions

Solution Solution Solution

Internal Company Solutions

Solution Solution Solution

Interfaces

and Apps

Communications Infrastructure

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Connect Optimize

Key Concept behind IIoT

To the products you

make, sell, or lease

To your customers

To your partners in

the value-chain

To your operations

The generation of insight

The performance of your assets

Your ability to serve customers

Your ability to capture economic rent

Workflows

To create outcomes not previously possible

&

PwC Digital ServicesPwC Advisory

Connect & Optimize:The Connected Farm

OUTCOMES FOCUS: FARM PRODUCTIVITY & YIELD

• Increased investment

• Monetization models

• Product/service bundling

“Is anyone making money with IIoT?”

A: Yes.

PwC Advisory

PwC Advisory

GROWTH

1o - 20%% of Total Revenue of the next 5 years

Over the next five years, 42% expect between

10-20% of total revenue from IIoT products

and services

If companies can’t get

this right, they will be

at a competitive

disadvantage

ED ABBO

PRESIDENT & CTO, C3 IoT

INVESTING

4 of 5Investing in product development

Four in five manufacturers are investing in

IIoT product and services development

R&D

Up to 20%Of R&D budget being allocated

40% earmarking up to 20% of their total research

and development budgets to IIoT development

REVENUE

41%Generated IIoT Revenue last year

Among those offering IIoT products and

services, 41% of respondents indicated that

those generated up to 5% of total revenue

last year.

“

About half of manufacturers

currently offering IoT products and services are selling customer-managed IoT platforms

Also, nearly one in three manufacturers is deploying products-as-a-service as their IoT business model

4%

19%

30%

47%

Other

Fully-integrated

Service

Products-as-

a-service

Bundled Products &

IoT Services

Bundling products and services is the most common business model

Which IoT-driven business model is

your company currently deploying?

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PwC Advisory

There are a number of IIoT business models; each monetizing their offerings using a combination of products and services

Remotely managed data with alerts & insights

Subscription basis for IIoTproducts and services, or on

contingency based on performance outcomes

Remotely managed enterprise-wide solutions

Subscription basis, complete suite of IoT products and

services, or on contingency based on performance

outcomes

Customer pays per: -hour, -unit, -alert, etc.

Based on customer usage, or when customer receives alerts

on performance, or insights on gaining efficiencies

Data analysis from

Manufacturer

IoT-driven field

services

The “Pay-Per”

Model

Optimizing Costs and Service

Real-time customer access to data

Separate premium for a suite of services or upfront

premiums for IoT-enabled asset at the point-of-sale

Product Performance

Monitoring

Digitizing Operations

PwC Advisory

Connect & Optimize:Digital Aviation

UPTIME, COST & SERVICE OPTIMIZATION

MONETIZATION: USE, SHARE & SELL

PwC Advisory

There are a number of IIoT business models; each monetizing their offerings using a combination of products and services

Real-time customer access to data

Separate premium for a suite of services or upfront

premiums for IoT-enabled asset at the point-of-sale

Remotely managed data with alerts & insights

Subscription basis for IIoTproducts and services, or on

contingency based on performance outcomes

Customer pays per:-hour, -unit, -alert, etc.

Based on customer usage, or when customer receives alerts

on performance, or insights on gaining efficiencies

Product Performance

Monitoring

Data analysis from

Manufacturer

The “Pay-Per”

Model

Optimizing Costs and Service

Remotely managed enterprise-wide solutions

Subscription basis, complete suite of IoT products and

services, or on contingency based on performance

outcomes

IoT-driven field

services

Digitizing Operations

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Connect & Optimize:The Connected Vehicle

CUSTOMER EXPERIENCE AND ENGAGEMENT

MONETIZATION: NEW REVENUE MODELS

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There are a number of IIoT business models; each monetizing their offerings using a combination of products and services

Real-time customer access to data

Separate premium for a suite of services or upfront

premiums for IoT-enabled asset at the point-of-sale

Remotely managed data with alerts & insights

Subscription basis for IIoTproducts and services, or on

contingency based on performance outcomes

Remotely managed enterprise-wide solutions

Subscription basis, complete suite of IoT products and

services, or on contingency based on performance

outcomes

Customer pays per:-hour, -unit, -alert, etc.

Based on customer usage, or when customer receives alerts

on performance, or insights on gaining efficiencies

Product Performance

Monitoring

Data analysis from

Manufacturer

IoT-driven field

services

The “Pay-Per”

Model

Digitizing Operations Optimizing Costs and Service

Connect & Optimize:Smart Factory

PwC Advisory

PRODUCTION OPTMIZATION

MONETIZATION: COST REDUCTION, IMPROVED CUSTOMER SERVICE

• Outcomes-back

• Fail fast and learn

• Digital IQ

A: Get Smart, Get Moving.

“How does the journey start (and accelerate)?”

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Common Challenges

Capturing the valueRecognizing the gap between value created and value captured

Running the business with two different commercial modelsand the transition that has to happen

Getting organizedOperating model and organization capabilities

Impact on FinancialsWho owns the asset and impact on revenue models (transfer of product versus provisioning of service)

PwC Advisory

Five recommendations to advance your position in the IIoT race

22

Identify

Entry Points

Define

Value

Develop go-to-

market strategy

Create Business

Model

Learn &

Improve

Identify do-able, realistic entry points (or expansion plans) into the IoT products & services market

Define & demonstrate how IoT products & services create value for your customers & your company

Develop effective IoT go-to-market strategies to effectively support your IoT products and services offerings

Create scalable & future-proof IoT business models & promote a culture of entrepreneurship to develop them

Learn from your products and your customers to improve, accelerate, & scale up your IoT products & services

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Your Questions

Hopefully Covered Today Worth Mentioning Now Requires a Richer Discussion

• How can a traditional manufacturing

company change its business model to get

significant revenue growth through IIoT?

• How companies are creating value

through IIoT and digitalization

strategies. Potential new business models

emerging.

• How to generate revenue streams for

services from the availability of data from

IoT

• What are the overarching themes that

drive the ability to commercialize IoT?

• How to balance investment in future

growth via digital products vs. investment

required for current products

• Price point or application tipping points

where IIoT capabilities are expected,

differentiator or not applicable 'today'&5

yrs

• Do customers know they need IoT? We…haven't

heard much demand for IoT

• How do you gauge customer interest if similar

products do not exist in the market yet?

• What are the main arguments to convince an end-

user to use IIoT solutions.

• How do you identify early adopter customers who

want to participate in agile IIoT solution devmn’t?

• What can IT organizations do to help facilitate IoT in

our manufacturing facilities - how can we also best

stay out of the way.

• We sell through distribution - How can we better

support the online specification/decision-making

process without owning POS?

• What key areas can we focus on to get an initial

payback that will help fund additional activities! ie

energy, efficiency, maint

• Would like to hear the most common uses of IoT for

manufacturers driving revenue and used internally to

reduce costs.

• Real examples of manufacturers with a business

case

• Benefits/disadvantages of managing other

company's data on your own server

• Cybersecurity

• Data ownership

• How to address inter-operability? Are

there any open standard communication

protocol that the industry is migrating

towards?

• Transition from independent locally

housed equipment control and monitoring

to a hosted cloud based interconnected

solution

• Use on manufacturing equipment for

predictive maintenance and processes to

fingerprint data collected

• What are key information security

considerations for IoT and how is it

evolving over the last few years?

• Interested in case studies - how others

have developed and launched a strategy

around smart connected products and

factories

PwC Advisory

Thank you!

© 2018 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of

the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its

member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s

professional judgment or bind another member firm or PwCIL in any way. 388427-2018 MAPI Presentation.

Steve Pillsbury

Principal, PwC

Steve.pillsbury@pwc.com

+1 773 383 1263

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