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Data Monetization and the New Economy for Connected Things

March 19, 2019
Industry is changing the way it looks at product, from the products themselves to data collecting devices.

We have entered a period where technology is enabling rapid change in how equipment and devices are deployed, maintained, operated, and monetized—the pace of potential change is perhaps the greatest in history. Things which traditionally were purely mechanical are now augmented with digital capabilities. These digital capabilities enable the mechanical thing to become a living thing of sorts, with the ability to change its capabilities and processes over its lifetime.

Digitization can report information about equipment and devices health and ongoing operations. As we see these new possibilities emerge, we see a plethora of companies ignoring these new abilities, and a result they are ignoring the possible financial transformations which it potentially brings.

With the ability to cost effectively connect “things” and collect a wealth of data from them, why has the exploitation of these newly enabled capabilities not accelerated at a more rapid pace? Why aren’t more product creation companies moving from being a product company that generates a wealth of data, to a data monetization company that builds products as a means to provide a broader stream of services around the product, which is underpinned by the analysis and resultant insights from the data they produce?

StreamR’s data market place lets data be traded.

Rolls-Royce is a UK-based company that formerly built jet engines, sold them, and then provided services to the customers who purchased its engines. But now, Rolls-Royce has instrumented each engine tracking thousands of operational data such fuel usage, cabin pressure, cabin environment, and specific data about the flight, including altitude and wind. Rolls-Royce’s operations center receives all this data, which is then analyzed in real-time to provide insights about ongoing operations. Operational anomalies can be detected while the flight is in operation, and logistics for any necessary maintenance can be planned to minimize any flight disruption while also assuring passenger safety.

But perhaps an even greater value for Rolls-Royce is the availability of a “living laboratory” of operational data about its engines, derived from a seemingly endless set of differing environmental situations—from passenger load, to operational temperatures, to weather extremes. The ability to collect this mass of data as a side effect of the company’s ongoing operations provides an infinitely valuable data set for analysis to drive future improvements in its engines.

Rolls-Royce has also instrumented its manufacturing process, allowing it to collect masses of data about each engine as it is manufactured. The ability to correlate operational data with manufacturing data further increases the ability to determine improvements in how the engines are engineered, manufactured, and operated.

Rolls-Royce has instrumented jet engines that track thousands of data points, which has opened a whole new business model to it capabilities.

It’s not just jet engines that are being instrumented. Hewlett Packard Enterprise has announced its partnership with StreamR, in which it is collecting information in real-time from connected vehicles, where data is collected from sensors within the car. Data including fuel consumption, acceleration, gearing, and current location is collected and then made available via the StreamR platform.

From here, StreamR leverages Blockchain technology, which filters and augments the data to make it available in a data marketplace. While the initial rollout is focused on a specific vehicle manufacturer, the long-term ability to produce a marketplace of data about ongoing operations of a large set of vehicles creates a new source of value.

Digitally enabling once purely mechanical things introduces new capabilities, and the dynamic enablement and disablement of features without having to physically touch the device. International Data Corporation recently reported that 38% of IoT producers currently derive half or more of its revenue from hardware (aka “things”), but that proportion will decrease to 33% within the next two years.

In contrast, 32% of respondents derive half or more of their revenue from services, and that figure will increase to 38% within the next two years. The report also indicated that 31% of companies are now using software to utilize data from IoT device sensors to uncover new services opportunities like repairs and sales opportunities

The data from this report supports that the leaders in industries are recognizing the value of data and the differentiation that can come from its usage. They are transforming traditional business models, and enabling new revenue streams that once were inconceivable.

But as we digitize, we must also think differently to maximize the value that we achieve. We must get “out of the box” and find new creative approaches. We cannot simply instrument traditional approaches, with the same or slightly improved success criteria. Data has become the new oil. The knowledge and insights that are enabled through the masses of data that we collect are unbounded, but only if we don’t look at the data with predetermined results.

Moving from a business intelligence approach (where we attempt to validate an assumption) to an artificial intelligence and machine learning approach (where we learn “what we didn’t know we didn’t know”) is where game-changing results will occur.

Jim Fletcher is a strategy partner with Momenta Partners. With extensive experience in executive management and technical leadership, he has held positions in areas of networking, IT systems management, and pervasive computing. Fletcher has a wealth of knowledge in IoT solution development including device connectivity, data collection, cognitive analytics, digital twin, and machine learning. He was most recently Distinguished Engineer and CTO for IBM’s Watson IoT Platform and is an IBM master inventor holding over 60 patents.

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