Pilot purgatory sounds like a hectic aviator schedule, but with the Internet of Things, it signals pilot programs traveling at a snail’s pace – if at all.
While most businesses with pilots believe in IoT’s economic potential, a McKinsey survey in May 2017 found that less than 30 percent of pilots are starting to scale. Eighty-four percent of companies were stuck in pilot mode for over a year and 28 percent for over two years.
Pilots that scale successfully possess common success factors (see figure above). Here are seven based on our research and observations:
- Secure CEO support. IoT projects that scale positively have a CEO leading the push. Support from the CEO shepherds a project past the bumpy spots and defends it throughout the organization.
- Start simple, execute relentlessly. Sustaining momentum requires wins. Be wary, though, of declaring victory too early. Pick a simple use case and follow through relentlessly until you capture value. Successes help land support of frontline employees and expose vulnerabilities around the need for process reengineering, talent, culture and alignment, and go to market.
- Ponder outcome vs. technology. Rather than becoming enamored by technology, ask more nuanced questions around the business model before choosing a pilot:
- Value proposition: What is the offering? What user needs does it address? Why is it better? How does it create customer value?
- Delivery model: What is the go-to-market model? What parts of the value chain and functions must change? Which ecosystem partners must unite to deliver this?
- Economic element: It is easier to see the link to value for operational use cases (e.g., smart factory-related) than it is for companies seeking to drive revenue growth through IoT offerings. Our research shows most value created becomes consumer surplus, leaving a portion for a provider ecosystem to capture. Companies must ask: What portion of this value will the customer share? How many people in the value chain will lay claim to this? What portion of this value flows to the bottom line? What are direct and indirect ways to monetize this?
- Focus on people. Companies that scale IoT enlist employees with an entrepreneurial bent and who embrace change. They help set a transformation’s pace and tone. Also required: cross-functional collaboration among those with deep process knowledge, analytical acumen, and digital and IT experience. “Business-building leadership” assists in translating technology to business outcomes and commercial opportunities. Recruiting and retaining this talent is hard, especially in bureaucracies.
- Treat data as a transformational asset. Properly used data creates a sustainable business advantage and innovative business models. But consider the data sources. One company couldn’t perform analytics on its equipment because it didn’t own the data.
- Bring clarity around your technology stack. With today’s plethora of IoT platforms, picking the right one proves hard. Ask a set of clear questions around five areas – applications, data management, infrastructure needs, security and edge process/control – to select the right platform.
- Build an ecosystem of tech providers, not a logo collection. Few website logos reflect meaningful relationships. One company invested $1 million in a test plant after a handshake between its CEO and technology provider. The result: a science experiment that could not scale. Meaningful relationships require a clear value proposition for each party, skin in the game, common objectives, and successes in delivering joint value.
IoT trials get stuck in purgatory for many reasons. This starter list reflects what we see as emerging success criteria.