1. proof of value: asking about the economic benefit

Companies often start an IoT project with a "proof of concept" to test the technical feasibility. What they fail to recognize: The basic technology is now so advanced that it is no longer a limiting factor. There is no need to worry too much about it.

Much more important is the question of what business benefits an IoT project brings. A proof of value should therefore be carried out in a controllable productive environment. At first glance, the focus is usually on increasing process efficiency.

Equally important, however, are the questions: What can I do to increase customer benefit? How can I develop data-driven services as an additional business model? As early as the proof of value stage, you should consider which other areas an IoT project can have an impact on.

It is important to consider the entire value chain. For example, if a compressor manufacturer no longer sells machines in future, but offers compressed air as a service, it must also change its invoicing - new business models can therefore also significantly change traditional administrative processes.

2. it is "only" software: start quickly with a minimal approach

The economic benefits of an IoT project cannot be determined at a desk or in a laboratory environment. For the proof of value, companies need to put their IoT scenario into practice. A minimum range of functions, known as the minimum viable product (MVP) approach, is initially sufficient for this.

If you want to deliver every conceivable function right from the start, you will only block yourself and lose valuable time. IoT applications are largely software-based. This means that they can still be changed, expanded and adapted to current requirements during operation. In the first step, an MVP only needs to be able to do what is absolutely necessary to create added value. This allows companies to put their IoT project into practice more quickly and gain initial experience. They receive rapid feedback from their users and can make adjustments and changes based on this feedback.

This increases the chances of developing an IoT-based solution that is well received by customers as quickly as possible. The minimal approach also has another advantage: if the IoT-driven innovation does not deliver the desired added value, large sums of money are not immediately lost, but the costs remain manageable.

3. team players needed: using an ecosystem

IoT projects are not a one-person game. They require collaboration in many different sectors. For example, companies not only need an IoT platform, but also the right sensor technology to collect data. They need to retrofit old machines to make them IoT-capable and require a suitable analytics solution.

They also need someone to provide the infrastructure for data transmission. A single manufacturer or service provider cannot do all this alone. Instead, a network of competent partners is required. A good IoT platform provider brings such an ecosystem with them and can recommend suitable partners. This has the advantage that the project participants have already worked together frequently and are well attuned to one another. Companies also save a lot of time and money during the selection process.

4. make or buy: Buy horizontal technology, develop vertical applications yourself

When it comes to the technical implementation of their IoT projects, companies are faced with the question: what should I buy and what is better to develop myself? It is generally advisable to purchase the horizontal technology infrastructure, i.e. the IoT platform for device management or edge computing. There are already highly effective solutions on the market here, so you don't have to reinvent the wheel yourself.

The vertical application should then be built on this infrastructure itself, as it is the intellectual property of the individual company, with which it can differentiate itself from the competition and create sustainable competitive advantages.

More courage to take risks

One thing is clear: like any new product launched on the market, an IoT-based innovation can also fail. However, companies must not make the mistake of dropping out completely. The experience gained is valuable for the future.

It is advisable to build up a portfolio of IoT use cases in different areas - for example service, logistics, new products, manufacturing - and to experiment in different directions.

Oliver Edinger is Head of the Internet of Things Competence Center for Germany, Austria and Switzerland. © Software AG

Only those who dare to make mistakes can produce innovations. The key is to make mistakes quickly and correct them quickly. Companies must become bolder with regard to IoT projects if they want to use the potential of IoT to their competitive advantage.

Oliver Edinger, Head of the Internet of Things Competence Center for Germany, Austria and Switzerland at Software AG / am