IoT and Operational Excellence

By Christian Green, Kepner-Tregoe 

Digitization is no longer the next big thing. Today it is the standard for operations, with the IoT (the Internet of things) driving organizational transformation towards Industry 4.0. Critical to moving ahead is understanding where your organization can realize value and how it will affect your existing operations. What metrics are you hoping to improve? How will this impact your processes, human resources, and other factors?

Too often the pressure to embrace IoT results in streams of information that add complexity with little additional value. Setting priorities and making decisions should reflect the need to build specific value streams and improve customer satisfaction. Organizations that let their strategic goals (such as increased throughput, improved quality, reduced defects, etc.) guide their digitization efforts are more likely to realize increased value and less likely to produce unused information flows.

Manufacturing operations are adding IoT sensors with the intention of improving production. But before moving forward, the organization must strategize what they want to measure and how this data will help them to improve. While some data may be important in ways that are not yet understood, in order to justify digitization, it is critical to understand what data will add value now and how it will be used.

Many organizations feel the pressure to act without clearly defining their objectives and how to measure them. Where can data add value? Is your intention to increase throughput, decrease defects, streamline processes? When the data becomes available, do you know how it will be used? Organizations must be prepared to consider how employee responsibilities will change.

On a strategic level, your organizational goals should drive your digitization program. The IoT will produce new data streams that can deliver the value you are seeking if you know what you want, and you have the necessary analytics and reporting in place to deliver.  To optimize new data streams, it is critical to understand how it will be realized.

The big game changes offered by artificial intelligence, the Internet of Things, and Blockchain will eventually filter into most operations. In preparation, organizations must continue to digitize and optimize the growing stream of data that will enable the future. Organizations need to consider both the opportunities and the risks that Industry 4.0 can afford in the short and long-term. Incorporating risk and opportunity analysis into your digitization plan, can help to ensure and enhance your efforts. For example, will the new data provide you with opportunities to add features that will avoid commoditization of your product or that will enable entrée into new markets? Will it result in production capabilities that could transform your existing business model? Will it displace workers who can offer value in other ways? Will data go unused because the necessary analytics are not in place or because it will not result in greater customer satisfaction?

These five key actions should guide development of your digitization initiative. If your existing IoT program has not lived up to expectations, review these steps to improve your plan as you continue to move towards Industry 4.0.

1. Set objectives that support your corporate strategy.

2. Weigh your objectives by relative importance.

3. Consider IoT alternatives that best support your objectives.

4. Evaluate the risks and opportunities of each alternative.

5. Choose the action/s that best meet your objectives with acceptable risk and the potential for new opportunities.

Read more about Operational Digitization from Kepner-Tregoe 

Operational Excellence Crossroads: Humans and Machines

Christian Green is Global Leader for Operational Excellence at Kepner-Tregoe. He leads a global consulting team that supports manufacturing clients’ pursuit of Operational Excellence with a practical focus on driving results by improving key performance indicators.

For over 60 years, Kepner-Tregoe has empowered thousands of companies to solve millions of problems. Kepner-Tregoe services are designed to permanently address organizational challenges with measurable results that improve quality and performance while reducing overall costs.