Business Strategy and Innovation Framework
by connected devices to create new value-adding information can lead to the creation of new services. Any investment decision must consider this potential.
5.3.2 BUSINESS CASE CHALLENGES
Organizations developing an IIoT business case are likely to encounter several challenges that may not be obvious at first glance.
Firstly, enterprises should not underestimate the fixed costs for hardware development. Many assume that recent advances in low-budget hardware such as Arduino and Raspberry Pi have changed the laws and economics of hardware development, but the costs of creating reliable hardware for deployment are still high. They include the initial design, prototyping, testing, and certification phases, as well as integrating IoT capabilities into existing hardware. Many IIoT business cases require significant initial investment before any revenue generation, and business models often rely on economies of scale to achieve acceptable unit costs. This is risky.
Secondly, IIoT-enabled connected products require a backend infrastructure that has ongoing operating costs. One option for covering them is to introduce pay-per-use or subscription-based models, but these models usually encounter severe customer acceptance challenges, especially when hardware is involved. A more attractive option is to build the operating costs into the sales price and implement a variety of risk insurance tactics, such as planned obsolescence. 1
These are just two examples of the complexity of IIoT business cases, yet they illustrate the effectiveness of a structured process for business case development, and clarify why these business cases take time to reach a certain level of maturity.
5.3.3 IMPACT & RISK ASSESSMENT
Business cases are a good starting point for sensitivity analyses, which generally involve the systematic modification of important quantitative assumptions to assess their effect on the outcome [ BD1 ]. Since future value streams are subject to uncertainty, the assumptions underpinning the business case should be documented clearly and linked to the business case calculation. This allows the impact of any changes to the parameters to be reflected in the ROI.
IIoT business cases typically follow the same procedure as traditional business cases for sensitivity analysis. Assumptions that have a high impact on business success can include technology risks like device errors, risk that partners will change their minds, that may not be in the business case calculation. As such, enterprises should invest significant time in identifying and profiling a more extensive list of risks. This should include operational, technology, execution, implementation and security risks and identify any pitfalls or lessons learned from previous projects, potential suppliers and ecosystem partners. There is a wide range of recognized risk management frameworks available to support this kind of analysis.
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For further information and specific examples, please refer to Felix Wortmann on Enterprise-IoT. org [ FW1 ].
IIC: PUB: B01: V1.0: PB: 20161115- 31-