The Industrial Internet of Things, Volume B01:
Business Strategy and Innovation Framework
IIC:PUB:B01:V1.0:PB:20161115

Business Strategy and Innovation Framework
Copyright © 2016, Object Management Group, Inc.
Copyright © 2016, Bosch Software Innovations
Copyright © 2016, Hewlett Packard Enterprise
Copyright © 2016, InterDigital, Inc.
Copyright © 2016, Machina Research

USE OF INFORMATION—TERMS, CONDITIONS AND NOTICESThis is an Industrial Internet Consortium document (the “Document”) and is to be used inaccordance with the terms, conditions and notices set forth below. This Document does not
represent a commitment by any person to implement any portion or recommendation containedin it in any products or services. The information contained in this Document is subject to change
without notice.

LICENSES
The companies listed above have granted to the Object Management Group, Inc. (OMG) and its
Industrial Internet Consortium (the “IIC”) a nonexclusive, irrevocable, royalty-free, paid up,
worldwide license to copy and distribute this Document and to modify this Document anddistribute copies of the modified version. Each of the copyright holders listed above has agreed
that no person shall be deemed to have infringed the copyright in the included material of any
such copyright holder by reason of having copied, distributed or used such material set forth
herein.
Subject to all of the terms and conditions below, the owners of the copyright in this Document
hereby grant you a fully-paid up, non-exclusive, nontransferable, perpetual, worldwide license(without the right to sublicense) to use, copy and distribute this Document (the “Permission”),
provided that: (1) both the copyright notice above, and a copy of this Permission paragraph,appear on any copies of this Document made by you or by those acting on your behalf; (2) theuse of the Document is only for informational purposes in connection with the IIC’s mission,
purposes and activities; (3) the Document is not copied or posted on any network computer,publicly performed or displayed, or broadcast in any media and will not be otherwise resold ortransferred for commercial purposes; and (4) no modifications are made to this Document.
This limited Permission is effective until terminated. You may terminate it at any time by ceasing
all use of the Document and destroying all copies. The IIC may terminate it at any time by notice
to you. This Permission automatically terminates without notice if you breach any of these terms
or conditions. Upon termination, or at any time upon the IIC’s express written request, you will
destroy immediately any copies of this Document in your possession or control.
The Licenses and Permission relate only to copyrights and do not convey rights in any patents(see below).

IIC:PUB:B01:V1.0:PB:20161115- ii -

Business Strategy and Innovation Framework

PATENTS
Compliance with or adoption of any advice, guidance or recommendations contained in any IIC
reports or other IIC documents may require use of an invention covered by patent rights. OMG
and the IIC are not responsible for identifying patents for which a license may be required tocomply with any IIC document or advice, or for conducting legal inquiries into the legal validity
or scope of those patents that are brought to its attention. IIC documents are informational andadvisory only. Readers of this Document are responsible for protecting themselves against
liability for infringement of patents and other intellectual property that may arise from following
any IIC recommendations or advice. OMG disclaims all responsibility for such infringement.

GENERAL USE RESTRICTIONSThis Document contains content that is protected by copyright. Any unauthorized use of thisDocument may violate copyright laws, trademark laws and communications regulations andstatutes. Except as provided by the above Licenses, no part of this work covered by copyrightmay be reproduced or used in any form or by any means—graphic, electronic, or mechanical,
including photocopying, recording, taping or information storage and retrieval systems—without
permission of the copyright owner(s).

DISCLAIMER OF WARRANTY
WHILE THIS DOCUMENT IS BELIEVED TO BE ACCURATE, IT IS PROVIDED "AS IS" AND MAY
CONTAIN ERRORS OR MISPRINTS. THE OBJECT MANAGEMENT GROUP, INC. (INCLUDING THE IIC)
AND THE COPYRIGHT OWNERS LISTED ABOVE MAKE NO WARRANTY, REPRESENTATION OR
CONDITIONS OF ANY KIND, EXPRESS OR IMPLIED, WITH REGARD TO THIS DOCUMENT,INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF TITLE OR OWNERSHIP, ANY IMPLIEDWARRANTY OF MERCHANTABILITY OR ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSEOR USE. IN NO EVENT SHALL THE OBJECT MANAGEMENT GROUP, INC. (INCLUDING THE IIC) OR
ANY OF THE COPYRIGHT OWNERS BE LIABLE FOR ERRORS CONTAINED HEREIN OR FOR DIRECT,INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, RELIANCE OR COVER DAMAGES, INCLUDING
LOSS OF PROFITS, REVENUE, DATA OR USE, INCURRED BY ANY USER OR ANY THIRD PARTY IN
CONNECTION WITH THE FURNISHING, PERFORMANCE, REPRODUCTION, DISTRIBUTION OR USE
OF THIS MATERIAL, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
The entire risk as to the quality and performance of any software or technology developed using
this Document is borne by you. This disclaimer of warranty constitutes an essential part of theLicenses granted to you to use this Document.

LIMITED RIGHTS NOTICEThis Document contains technical data that was developed at private expense and (i) embodies
trade secrets, or (ii) is confidential and either commercial or financial. This document was notproduced in the performance of a government contract and is not in the public domain. The use,
duplication or disclosure of this Document by the U.S. Government is subject to the restrictions
set forth in 48 C.F.R. 52.227-14–Rights in Data “Limited Rights Notice (Dec. 2007) (a) and (b),” or
IIC:PUB:B01:V1.0:PB:20161115- iii -

Business Strategy and Innovation Framework
as specified in 48 C.F.R. 12.211 of the Federal Acquisition Regulations and its successors, asapplicable. This data may only be reproduced and used by the U.S. Government with the express
limitation that it will not, without written permission of the copyright owners, be used for
purposes of manufacture nor disclosed outside the Government. The copyright owners are as
indicated above and may be contacted through the Object Management Group, Inc., 109
Highland Avenue, Needham, MA 02494, U.S.A.

TRADEMARKSThe trademarks, service marks, trade names and other special designations that appear on andwithin the Document are the marks of OMG, the copyright holders listed above and possibly
other manufacturers and suppliers identified in the Document and may not be used or
reproduced without the express written permission of the owner, except as necessary to
reproduce, distribute and refer to this Document as authorized herein.

IIC ISSUE REPORTING
All IIC documents are subject to continuous review and improvement. As part of this process, we
encourage readers to report any ambiguities, inconsistencies or inaccuracies they may find in thisDocument or other IIC materials by sending an email to admin@iiconsortium.org.

ACKNOWLEDGEMENTS
This document is a work product of the Industrial Internet Consortium.
EDITORSStephen Mellor (Industrial Internet Consortium)
AUTHORSThe following persons have written substantial portion of material content in this document:
Jim Morrish (Machina Research), Ken Figueredo (InterDigital, Inc.), Steve Haldeman (Hewlett
Packard Enterprise), Veronika Brandt (Bosch Software Innovations).
CONTRIBUTORSThe following have contributed valuable ideas and feedback that significantly improve thecontent and quality of this document:
Enterprise IoT (O’Reilly Press 2015, ISBN 978-1-4919-2483-9).

IIC:PUB:B01:V1.0:PB:20161115- iv -

Business Strategy and Innovation Framework

CONTENTS
1 Overview .......................................................................................................................... 7
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9

Introduction ........................................................................................................................ 7
Purpose ............................................................................................................................... 7
Scope .................................................................................................................................. 7
Structure ............................................................................................................................. 7
Audience ............................................................................................................................. 8
Use ..................................................................................................................................... 8
Terms & Definitions ............................................................................................................. 8
Symbols .............................................................................................................................. 8
Conventions ........................................................................................................................ 8
1.9.1
Typographical and Linguistic Conventions and Style .......................................................... 8
1.10 Relationship with Other IIC Documents ................................................................................ 9

2 Executive Summary......................................................................................................... 10
3 Market Context............................................................................................................... 13
3.1

The Opportunity for the Industrial IoT ................................................................................ 13
3.1.1
Business and Market Drivers ............................................................................................ 13
3.1.2
Societal Drivers ................................................................................................................. 14
3.2 The Transformation of Business Models with the Industrial IoT .......................................... 15
3.2.1
General Business Model and Market Transformation...................................................... 15
3.2.2
Unification of Disparate Business Elements ..................................................................... 15
3.2.3
Enhanced Development and Production .......................................................................... 16
3.2.4
Increasing Customer Value ............................................................................................... 16
3.3 Opportunity at the IT/OT Intersection ................................................................................ 17
3.3.1
The New Intersection and Opportunity Point .................................................................. 17
3.3.2
Harnessing Opportunities at the IT/OT Boundary ............................................................ 19

4 Industrial IoT Strategy ..................................................................................................... 20
4.1
4.2

Initiating the Industrial IoT Journey .................................................................................... 20
Systematic Management of Industrial IoT Portfolio ............................................................ 21
4.2.1
Portfolio Management and Progress Tracking ................................................................. 21
4.2.2
Budget Tracking and Overall Roadmap ............................................................................ 23

5 Industrial IoT Business Model Innovation ........................................................................ 25
5.1

Ideation ............................................................................................................................ 26
5.1.1
Production Optimization................................................................................................... 27
5.1.2
New IIoT Business Model Ideation Tools .......................................................................... 27
5.2 Preparation ....................................................................................................................... 28
5.3 Evaluation ......................................................................................................................... 30
5.3.1
Business Case Calculation ................................................................................................. 30
5.3.2
Business Case Challenges.................................................................................................. 31
5.3.3
Impact & Risk Assessment ................................................................................................ 31
5.4 Initiation ........................................................................................................................... 33
5.4.1
Internal Organizational Setup ........................................................................................... 33
5.4.2
Inorganic Techniques ........................................................................................................ 33

IIC:PUB:B01:V1.0:PB:20161115-v-

Business Strategy and Innovation Framework
6 Industrial IoT Foundational Capabilities ........................................................................... 35
6.1

Industrial IoT Center of Excellence ..................................................................................... 35
6.1.1
Identifying and Applying IIoT Best Practices ..................................................................... 35
6.1.2
Enabling Change Management ......................................................................................... 36
6.1.3
Re-thinking Business Models ............................................................................................ 36
6.1.4
Managing Human Resources ............................................................................................ 37
6.1.5
IIoT Maturity Assessment ................................................................................................. 37
6.1.6
IIoT Governance ................................................................................................................ 38
6.2 Industrial IoT Platform ....................................................................................................... 39
6.2.1
What is an IIoT Platform? ................................................................................................. 39
6.2.2
IIoT Platform Selection Parameters .................................................................................. 42
6.2.3
Standards in the Industrial IoT .......................................................................................... 43

Annex A Revision History ................................................................................................... 45
Annex B Acronyms ............................................................................................................ 46
Annex C Glossary............................................................................................................... 47
Annex D References ........................................................................................................... 48

FIGURES
Figure 1-1: IIC Technical Publication Organization ....................................................................................... 9
Figure 2-1: IIC framework for identification and deployment of IIoT solutions ......................................... 12
Figure 3-1: Current IT/OT state and transformation potential ................................................................... 18
Figure 4-1: The identification, selection, and management process for IIoT opportunities (Source:
Machina Research, 2016) ................................................................................................................... 23
Figure 5-1: The specific nature of IIoT business models (Source: Bosch Software Innovations, 2016) ..... 25
Figure 5-2: IoT Business Model Builder (adapted from [BSI1])................................................................... 26
Figure 5-3: Value-creation network for an IIoT solution ............................................................................ 29
Figure 5-4: Business case context (Source: Enterprise-IoT.org) ................................................................. 30
Figure 6-1: High-level overview of key IIoT platform components (Source: Adapted from IIC OpenHorizontal testbed program [IIC2]) .................................................................................................... 40
Figure 6-2: IIoT platform functions ............................................................................................................. 41
Figure 6-3: Timeline of standardization efforts by IoT service enablers [SDO1], Source: more-withmobile.com (2016) ............................................................................................................................. 44

TABLES
Table 2-1: IIoT platform selection considerations ...................................................................................... 42

IIC:PUB:B01:V1.0:PB:20161115- vi -

Business Strategy and Innovation Framework

1 OVERVIEW
1.1

INTRODUCTION

This document is a deliverable of the Business Strategy Task Group, within the Industrial Internet
Consortium’s (IIC) Business Strategy and Solution Lifecycle (BSSL) Working Group.
It provides a high-level identification and analysis of issues that an enterprise will need to address
in exploiting Industrial Internet of Things (IIoT) concepts for commercial (or other) gain.

1.2

PURPOSE

Because uncertainly and flux characterize much of the IIoT market, the primary objective is to act
as a reference document for any enterprise planning to engage with IIoT concepts. The adoptionof frameworks and concepts documented herein accelerate gain by de-risking any decision to
deploy IIoT technologies. Accordingly, this document provides a single-source compendium of
the issues and challenges to consider before deployment of IIoT initiatives.
The secondary objective is to be a touchstone reference document that defines the scope of workand remit for the Business Strategy Task Group.

1.3

SCOPE

Of necessity, the scope of this document is wide ranging and high level. Subsequent documents
to be published by the Industrial Internet Consortium over the coming months will build on thisdocument incrementally. Specifically, they are likely to take one of two forms:
Detailed documents that unpick and analyze major business strategy to provide greater insight
into topics identified within the scope of this document, while being consistent with the overall
approach and framework.
Action-oriented documents that highlight 'next steps’ for organizations considering deploying IIoT
initiatives that build on the broader analysis here and in subsequent detailed publications.

1.4

STRUCTURE

While IIoT projects are in many ways quite similar to traditional systems integration projects,
there are significant differences. We emphasize those differences here, including sections on:Market context,
IIoT strategy,
IIoT business model innovation and
IIoT foundational capabilities.

IIC:PUB:B01:V1.0:PB:20161115-7-

Business Strategy and Innovation Framework

1.5

AUDIENCE

The two prime audiences for this document are CxOs (or equivalent) actively engaged in
specifying and deploying IIoT initiatives and CxO staff (or equivalent) in the early stages ofconsidering the deployment of IIoT initiatives.
Subsequent publications may be more suitable for CxOs (or equivalent) that are in the earlystages of contemplating IIoT initiatives, or other senior managers who may benefit from a morecomprehensive analysis of pertinent issues.

1.6

USE

The document sets out a robust approach applicable for any company seeking to engage in IIoT.
It is a comprehensive and relatively ‘heavy’ approach since we have taken the view that it ispreferable to present a more-or-less complete view of ‘best practice’ and so allow the reader todraw inspiration from collective thinking among IIC membership.
Clearly, any executive drawing from this document is free to adopt an appropriate ‘lighter touch’or existing internal project model, especially within smaller companies. Alternatively, andparticularly in the case of larger companies, a range of project support processes will already bein place and the approach documented herein should be used to inspire the enhancement ofexisting infrastructures in order to efficiently address the IIoT opportunity.
Many of the techniques and approaches discussed in this document are also applicable toconsumer IoT1 initiatives and, where relevant, we welcome the application of IIoT concepts in
consumer IoT environments.

1.7

TERMS & DEFINITIONSThis document introduces no significant new terms or definitions

1.8

SYMBOLS

This document introduces no significant new symbols

1.9

CONVENTIONSGiven that the document is non-normative, all ‘must’, ‘may’ and ‘should’ statements are to beinterpreted as English language and not as in RFC 2119.
1.9.1 TYPOGRAPHICAL AND LINGUISTIC CONVENTIONS AND STYLE
Terms that require definition are rendered in italics. (As the usage immediately preceding
demonstrates, italics may also be used as example, or for emphasis.)

1

Consumer IoT generally differs from industrial IoT due to the contrasting levels of emphasis typicallyplaced on security, quality, cost and quality of service in these two environments.

IIC:PUB:B01:V1.0:PB:20161115-8-

Business Strategy and Innovation Framework
Generally, only the first use of the term is italicized. However, when a term can be read in its
usual English language mode, the first use of the term may be italicized as the discussion becomes
technical. In the first example below, “safety” and “security” are used informally. In the second,
it introduces a definition.
Example 1: “Among the key system characteristics that must be considered, safety is
perhaps the most important, followed by security.”
Example 2: “Safety is the condition of the system operating without causing unacceptablerisk of physical injury or damage to the health of people, either directly, or indirectly as aresult of damage to property or to the environment.”

1.10 RELATIONSHIP WITH OTHER IIC DOCUMENTS
This document fits in the IIC Technical Publication Organization, see Figure 1-1.

Figure 1-1: IIC Technical Publication Organization

IIC:PUB:B01:V1.0:PB:20161115-9-

Business Strategy and Innovation Framework

2 EXECUTIVE SUMMARY
The Industrial Internet of Things will create massive new opportunities across all lines of business,with the potential to generate trillions of dollars in economic value.
Much like the advent of the commercial internet, the IIoT is set to transform virtually every
existing business model and vertical industry, creating new threats and opportunities for all
players. Access to new data sources and analytics tools, all on a previously unimagined scale, willdefine the contours of the corporate IIoT roadmap.
Enterprises will need to broaden their overall market approach, adapting business andoperational models through the integration of Information Technology (IT), Operational
Technology (OT) and customer-outreach platforms. IIoT solutions will unify disparateorganizational elements, processes and information sources, which will in turn enhance how
goods and services are developed and delivered. In addition, IIoT solutions will increase thevariety of business channels available to enterprises, creating more opportunity to add customer
value and deliver wider societal benefits.
However, current expectations among businesses that stand to benefit from these opportunities
are more guarded. Many leadership teams are unsure of what exactly IIoT means, how it differsfrom the competitive dynamics of the past and how to define new business strategies. They are
beginning to recognize that the competitive landscape is changing in ways they do not fully
understand, and that collaboration and mastery of new skills, such as those within IIoT, will beessential to business success. An organized, disciplined approach to moving forward with IIoT isessential to that success.
Firstly, businesses need to define their IIoT strategy and goals. Doing so will determine how
quickly they need to move and how they balance the risks associated with market leadershipagainst the risks for followers and late adopters.
No single enterprise will possess the full range of skills required to address the challenges
associated with IIoT. As a result, effective IIoT strategies will necessarily involve some degree ofparticipation in alliances and business partnerships. Many enterprises will participate in multiple
IIoT applications, making it necessary to formalize IIoT portfolio management and place
initiatives in the context of a corporate roadmap and budgeting process.
Secondly, businesses need a structured framework to target and select the right IIoT
opportunities. A framework for determining beneficial opportunities comprises four stages:
Opportunity ideation identifies IIoT application opportunities through an iterative process,motivated by two drivers: using IIoT technologies to optimize current products, services andbusiness operations, and; launching solutions based on innovative business models. Success in
IIoT requires addressing both elements.
Opportunity preparation details the ideas the business determines are worth pursuing. The aim
is to analyze and document them in detail to sharpen focus, derive underlying assumptions andassign actions to various team members to validate these assumptions.
IIC:PUB:B01:V1.0:PB:20161115- 10 -

Business Strategy and Innovation Framework
Opportunity evaluation develops an acceptable business case and implementation risk profile.
This step considers adapting investment decisions to handle a first wave of IIoT applications,followed by a flow of second- and subsequent-generation application opportunities.
Opportunity initiation addresses the challenge of structuring internal execution capabilities in a
way that allows deploying IIoT hardware, and software and service delivery specialists aseffectively as possible. This stage considers takes account of the cultural implications ofmultidisciplinary project teams.
This overall process of transitioning from strategy and IIoT project selection to execution rests on
two foundational elements: an IIoT Center of Excellence (CoE) and an IIoT platform.
Businesses will find IIoT concepts different from ‘business as usual’ activities, forcing them tomake use of new pools of expertise. To do this, some enterprises may augment internal skills
with IIoT partner ecosystems formed by large industrial players. Others will see value inestablishing their own COE to leverage expertise across multiple applications and business units,
apply consistent change-management techniques, evaluate implementation projects bothinternally and among competitors and implement best practices.
The second element of the implementation framework is to acquire an IIoT platform capability.
This corresponds to the technical systems that provide the enabling services necessary to deliver
IIoT applications. Examples of such services include connectivity management, device
management and IIoT application enablement.
Not all enterprises can justify the level of commitment in dedicated personnel and investment to
own their own IIoT platform. Many will share infrastructure to benefit from economies of scale.
Over time, enterprises will share application-enabler resources and data with the aim of driving
IIoT service innovation through economies of scope. Technology and standardization choices playa greater role in IIoT platform selection where enterprises are making strategic investments as
distinct from experimental or pilot evaluations.

IIC:PUB:B01:V1.0:PB:20161115- 11 -

Business Strategy and Innovation Framework

Figure 2-1: IIC framework for identification and deployment of IIoT solutions

The IIoT innovation framework and elements described later will help companies to generate themaximum possible benefit from IIoT concepts.

IIC:PUB:B01:V1.0:PB:20161115- 12 -

Business Strategy and Innovation Framework

3 MARKET CONTEXTThis section discusses the market drivers and opportunities presented
by IIoT and the factors influencing them. It also explores businessmodel transformation and the important intersection between IT and
OT.

3.1

THE OPPORTUNITY FOR THE INDUSTRIAL IOT

IIoT is reshaping virtually every existing business model and vertical industry, and is creating
significant new opportunities across all markets.
The promise of access to new and unified data sources in the IIoT age will require a platform for
improved decision-making by humans and machines. This data will come from a wide variety ofsources, including traditional internal business sources, IT and related systems, sensors, devices
connected to the internet, external social media sources, and other structured and unstructured
data elements such as audio, video and digital images.
Bringing these sources together for analysis within the context of IIoT will provide a basis formore comprehensive business monitoring, insight and control, while also increasing efficiency.
Beyond business processes, IIoT has the potential to have a positive impact on society and humanwelfare. It will open up new opportunities for jobs and training, and new avenues for businesses
by adding capabilities and revenue streams not previously considered within a given market.
3.1.1 BUSINESS AND MARKET DRIVERS
There are a number of internal and external business factors driving organizations toward IIoT
adoption. These include:






competitive pressures forcing accelerated planning and time to market,
continuous reevaluation of business models, value chains and commercial relationships,
accelerated Insight, adjustment and optimization of current operations,creation of additional and new value by the business andpotential for societal benefit.

To stay competitive in markets where disruption and change occur quickly, enterprises must
continually review and optimize their business strategy, planning and operational models. They
must look for ways to compete within existing markets and create new market playing fields.
Doing so requires access to internal and external data sources that can better inform thesedecisions. These data will come from connected devices, traditional data sources, social media
and more.
It is no longer enough to know how well operations performed last week; insight requires a view
into past activities, real-time adjustments to make determinations and corrections now, and
IIC:PUB:B01:V1.0:PB:20161115- 13 -

Business Strategy and Innovation Framework
predictive analysis to model future conditions. This past-present-future analytics approach will
increasingly become a priority and competitive advantage across all elements of a business.
In this accelerated and competitive environment, the ability to enhance and create new customer
value becomes key. Within any product or service, whether a website, a smartphone app, or aheart monitor, or factory floor device, cost and functionality must balance with customer
sentiment and experience. This creates a situation in which enterprises must constantly look forways to adapt business and operational models in real time, and to modify and add value to theirproducts, services and customer experiences. Enterprises need to continuously aim todifferentiate their offerings in existing markets and identify untapped opportunities in newmarkets.
This new environment also provides a plethora of opportunities for startups and small businesses
that will have the potential to integrate into the production domains of large companies in amore agile way.
3.1.2 SOCIETAL DRIVERS
While the perceived value of IIoT relates primarily to business and operational optimization, it
also has the potential to influence and impact society in a profound and positive way, including:

creating new jobs and job markets,
shortening time for and improving human and machine decisions,generating environmental benefits andproducing benefits for public health, safety and quality of life.

The connected, collaborative world will lead to an almost innumerable range of connection
points, applications, products, data sources, and software/integration needs. Due to growth inbusiness startups and established enterprises, there will be an increased need for a skilledworkforce to advance IIoT adoption. This will require the creation of new roles and skills toprovide technical enablers and services for this new industry.
An equally impactful benefit will come from enhanced decision-making processes, integrating
data from internal and external sources to enable more effective and timely decisions. For
example, in the case of a hospital, the connection and integration of bedside medical devices
alongside traditional hospital information systems and other patient-care data could have a
profound impact on both immediate and longer-term patient-care decisions. Similar potential forsocietal benefits exists in other industries, particularly in the context of smart cities.
The use of IIoT and associated data in reporting, real-time analysis and predictive models will
help improve local and global environmental conditions. This is especially true in scientificresearch and businesses directly focused on environmental resource utilization. Improvement
may be seen using IIoT to help focus on more effective utilization and analysis of past, present
and future conditions. These industries, as well as IIoT use cases directly related to public safety
and health will enhance quality of life and experience.

IIC:PUB:B01:V1.0:PB:20161115- 14 -

Business Strategy and Innovation Framework

3.2

THE TRANSFORMATION OF BUSINESS MODELS WITH THE INDUSTRIAL IOT

IIoT is set to transform business models in all markets in broadly similar ways:

extending the overall business model and market approach with customers toincorporate new value-generating elements,
providing a basis for unifying disparate internal organizational elements, processes andinformation,enhancing the development and production of goods and services andincreasing the variety of avenues for enhancing customer value and experience.

3.2.1 GENERAL BUSINESS MODEL AND MARKET TRANSFORMATION
Many current business models place strong emphasis on the effectiveness of internal production
processes. The focus of these models will broaden considerably in the IIoT world to include moreemphasis on customer relationship and value creation.
In the IIoT age, business models must still take account of traditional internal elements while
simultaneously transforming themselves to take advantage of the new spectrum of possibilities.
IIoT will affect operations, product development, marketing and the overall business value chain.
Business models must adapt to accommodate and take advantage of these changes.
Beyond this more general development, a significant opportunity exists for technology
developers to expand their business models into new markets, where they will function as IIoT
enablers. Offering their products and technologies for use as stand-alone or embedded elements
within other systems will open up new avenues for product distribution. These technologies may
include software, devices, sensors or mechanical elements. This opportunity also exists forproviders that offer services rather than products alone.
Enterprises that shift their business model as suggested here will realize increased market value
from the deployment of IIoT concepts, provide greater value to their customers, become moreagile and provide differentiating value to their customer base. Businesses that do not takeadvantage of IIoT will risk quickly losing market share to competitors that embrace it.
3.2.2 UNIFICATION OF DISPARATE BUSINESS ELEMENTS
Depending on the market segment, the new ‘factory floor’ can be almost anything: anequipment-manufacturing plant, department store, airplane or even a hospital room. Any one ofthese locations has the potential to produce a massive amount of data. In contrast to today, IIoT
will provide the opportunity to connect different parts of a business and unify its data, fromdevice to IT. This integration can lead to improved analytics and improved human and machine
decisions. Bringing these disparate sources together will require a new paradigm of howorganizational elements operate together.
New business models will have to take data connection, collection and analytics into account.
They must also consider the implications of bringing together data sources across all levels of theorganization (including from outside of the organization), where analytical capability needs to
IIC:PUB:B01:V1.0:PB:20161115- 15 -

Business Strategy and Innovation Framework
reside (at machine level, at the edge, or in IT), the security of systems, resources, and data, andlikely changes to business organization models or operational processes.
These elements will evolve over time, which means that enterprises implementing IIoT
methodologies must put governance structures in place that factor in the IIoT impact across theentire business. This system of governance must focus on determining the value of IIoT within
the enterprise at strategic and operational levels, and ensure a consistent implementation
approach in affected areas. See section 6.1.6 for additional discussion of this topic.
3.2.3 ENHANCED DEVELOPMENT AND PRODUCTION
To ensure the continued evolution of its product and service offerings, and strengthen its
competitive position, an enterprise must gain an understanding of customer needs, market
needs and usage behavior. Today, in all market segments, this cycle has accelerated. Enterprises
must transform their business models to reflect the way in which IIoT will enhance productdevelopment and production processes.
Within service industries, a combination of connected devices, data collection from numerous
sources, and analytics will provide business insight into areas not previously considered. In therailroad industry, for example, the monitoring of railroad track and train conditions, signals,
customer travel patterns and fuel consumption can produce insights that enable new or
improved service offerings, enhanced safety and more efficient operations. Incorporating thispotential into the business model help enterprises develop new services.
In manufacturing environments, the collection and analysis of data from connected internal
devices and internal systems, and the integration of these sources, can provide similar insight toincrease production efficiency and operational effectiveness. This is especially true in combining
manufacturing data from connected devices with business data (from sales, services, or supply
chain contexts, for example) to provide real-time and historical insight. Factoring this back into
operations, whether historical, real-time or predictive, helps optimize production.
3.2.4 INCREASING CUSTOMER VALUE
While many advantages of IIoT solutions relate to enhancing operational efficiency and enabling
new product development, a significant transformational value of IIoT lies in gaining insight thatwill improve overall consumer value in terms of service and product usage and overall customer
experience. Those companies looking to implement IIoT projects should consider both theoperational benefits and strategic value such projects bring to their business. This requires
thinking outside the operational context into a view of the business and its exposure to thecustomer.
As an example, consider an application on a tractor. Operationally, sensors could provide
information to optimize operations. Coupling in data from external sources (such as weather,
sensor data from fields, predictive yield calculations, infestation, pricing, data from local farmers)
can each add value. The combination could enhance the farmer’s business and operations giving
a more complete and even predictive picture of how, when, what the farmer does for planting,harvesting, impacting the environment and other farm activities.
IIC:PUB:B01:V1.0:PB:20161115- 16 -

Business Strategy and Innovation Framework
This same potential for operational and added value in business products, services and customer
experience exists for all market segments and industries.

3.3

OPPORTUNITY AT THE IT/OT INTERSECTION

IIoT is creating the potential benefit from the connection and integration of data frominformation technology (IT) systems and the data center with data from operational technology(OT) on the factory floor and connected devices. The IT side of business focuses on resources thatprocess data for business-related functions such as payroll, databases, customer access, various
business analysis, reporting tools, and inventory. The OT side targets systems and elements thatbuild, execute, control, and monitor industrial or service processes.
At present, operating models for many larger ‘traditional’ industrial enterprises include at least
some IT and OT assets. As the IIoT becomes more prevalent, the intersection of these elements
has the potential for both disruption and benefit within the enterprise.
While there is generally some integration between the IT and OT domains in most companies,
the degree of integration varies considerably by market segment. Many enterprises havedifferent processes, organizational structures and systems in place for each domain. Much of theintegration between the two is manual, loosely connected, or in silos.
With IIoT comes a significant opportunity, and a necessity, to bring these two operating worlds
together to the benefit of the entire business model. Indeed, the intersection between these twodomains and the potential for data integration across the business is one of the most significant
motivations and benefits of IIoT adoption.
3.3.1 THE NEW INTERSECTION AND OPPORTUNITY POINT
Until the advent of IIoT, there was limited collaboration or cross-linkage between the disciplinesof IT and OT, as Figure 3-1 illustrates. Such ‘islands’ of execution fostered organizational models
that, while individually effective, caused IT and OT to operate in relatively independent ways.
This is partly because IT and OT require different processes, systems, and measures, and even a
different operational ‘language.’
The net impact of this situation has been the inability to make use of broader business insightand learning to benefit production operations. Likewise, IT saw limited benefit from physicalworld and real-time analysis or trends that might increase business insight and allow for fasteradjustment of business models (further insight into this can be found in the IIC Reference
Architecture or IIRA [IIC1], section entitled ‘Functional Approach’).

IIC:PUB:B01:V1.0:PB:20161115- 17 -

Business Strategy and Innovation Framework

Figure 3-1: Current IT/OT state and transformation potential

In the IIoT space, there is a significant business and operational opportunity to be explored in theintersection between the IT and OT silos. While the two domains can continue to operate as
separate entities, enhanced integration of operational and business data, historical, real-timeand predictive analytics, control, interaction, and insight may lead to more integrated IT and OT
infrastructures, yielding benefits both vertically within both domains and horizontally across theentire organization.
As an example, consider an airline whose IT department manages the business systems(reservations, administration, planning systems, inventory, etc.), while the OT department
manages processes for ground-based and in-flight monitoring and operations.
During each flight, an aircraft generates extensive amounts of data. Using these data in flight canhelp operate the aircraft more safely and efficiently. Summary data from the aircraft—combinedwith ground-based maintenance data and even external information such as weather data—
could enable the airline’s IT department to create better predictive maintenance and flightanalysis. Over time, this would help to optimize the business, reduce costs, create new customer
value and enhance operational safety.
Likewise, summary data from predictive, optimization, and business analyses can impact realtime activities of the pilots and crew who are operating the aircraft. This data, when coupled withonboard aggregation and analysis, offers an opportunity to improve the safety and profitabilityof operations and to provide an enhanced customer experience.
The goal of IIoT in this context is not simply to enable connectivity, but to provide access to dataand create information assets that provide value across the enterprise from both business andoperational perspectives. These information assets will serve to enhance current operations andbusiness outcomes, and will open up new opportunities that were not previously possible.
IIC:PUB:B01:V1.0:PB:20161115- 18 -

Business Strategy and Innovation Framework
Such opportunities are not limited to a B2B context alone: B2C propositions will lead to increased
benefits for consumers, and B2B2C solutions have additional potential to transform value chains.
3.3.2 HARNESSING OPPORTUNITIES AT THE IT/OT BOUNDARY
Beyond the technical integration of IT and OT elements (e.g. connection, data source integration),the central strategic challenge for companies will be to combine and gather insight from data
across all aspects of the enterprise to make informed and integrated business and operational
decisions, whether in real-time or predictively.
An organization studying the integration of the IT and OT environments needs to study both howdata will be analyzed and where it should be analyzed (at the cloud, in a private data center, orcloser to OT assets) in both raw and more refined forms.
To harness this opportunity, companies will need an ordered governance approach to planningand connecting all elements of data and analysis gained across the business. This governancemust consider IT and OT operational objectives, overall business and market strategy, physicalsystems, connectivity and utilization of insights gained from, and back into, both elements. See
further detail in section 6.1.6.

IIC:PUB:B01:V1.0:PB:20161115- 19 -

Business Strategy and Innovation Framework

4 INDUSTRIAL IOT STRATEGYAn enterprise must define its vision and overall IIoT strategy before
embarking on an IIoT journey. Are the motivations for engaging in the
IIoT purely economic, or are there broader imperative in terms ofsocietal benefits (in the case of smart cities applications, for example)?
What is the overall market and competitive environment in which theenterprise plans to engage? How is this likely to change in the coming
years?
The strategy should reflect the extent to which the enterprise it plans to shift toward IIoT and the
speed at which this shift is to take place. Should the enterprise become a pioneer and attempt
to gain rapid market share, accepting a higher risk of failure? Or should it become a follower, only
implementing a new IIoT solution if certain that its customers will accept it and buy into its new
product or service? Some enterprises regard IIoT as just one of several important paradigm shifts
occurring today, and are willing to invest only limited resources in IIoT adoption. Others see it as
the paradigm shift of the next decade, and have already invested significantly in IIoT programsand established far-reaching internal change-management processes. Each strategy must set out
a vision, goals, and guiding principles appropriate to the enterprise’s viewpoint to shape its
overall approach to IIoT.
When the strategy is perceived to be important, or its effects likely to be wide ranging, it can bebeneficial to appoint a senior stakeholder from within the enterprise’s management team to leadand coordinate IIoT initiatives across the enterprise. This approach can ensure consistency
between different IIoT initiatives and minimize the chances of pursuing conflicting goals or
investing in less-than-optimal supporting infrastructure. Areas within which the senior
stakeholder could facilitate cohesion include the management team’s understanding of market
potential and approaches to new technologies and standards. The stakeholder would also help
to define corporate strategy with regard to alliances and partnerships, as well as overall
governance frameworks that apply to IIoT initiatives.
Enterprises will also need to define an appropriate guiding set of principles for collaborating withpartners and working within the overall IIoT ecosystem. In parallel, they will need to identify, ata high level, the capabilities that they are likely to need to engage in IIoT projects.
Adopting a well-defined and clear approach to IIoT and appointing a dedicated leader to navigate
the IIoT journey on their behalf, enterprises will significantly improve their chances of achieving
successful outcomes.

4.1

INITIATING THE INDUSTRIAL IOT JOURNEY

Although the IIoT journey resembles the traditional planning and implementation approaches
seen in IT and machine-to-machine (M2M) projects in a number of ways, one importantdifference is the emphasis placed on adding IIoT concepts to the strategic agenda (a changemanagement effort) and on establishing partnerships (need for a collaborative approach).

IIC:PUB:B01:V1.0:PB:20161115- 20 -

Business Strategy and Innovation Framework
The recommended approach is first to include IIoT as an item on executive-level agendas. The
move to adopt IIoT technologies is a CxO-driven initiative, not merely another IT or productdevelopment project. It will significantly transform the nature of the business—either byimproving operational processes by means of new insights, by enabling new business models
based on real-time data, or by delivering new customer experiences and engagement models
through connected devices and services.
The first questions to answer are, ‘How compelling to our business is the IIoT hype? Is this reallythe single most important disruptive force set to change our business in the coming years? Or is
it just one of several change areas, or something that’s not relevant to our business at all?’In a large, highly diversified organization, the answer to these questions may differ from one
business segment to the next. What’s more, it may not relate explicitly to the IIoT. For an
automotive OEM, the question might instead be, ‘How important will the connected vehicle be
to me, and when will it impact my business?’ An industrial equipment company looking to design
new products with integrated services might ask, ‘What is the strategic importance of connected
devices in the context of our overall servitization strategy?’ Some CEOs might prefer to hire amanagement consultancy firm to answer these questions, while others will decide this together
with their inner management circle based on internal business knowledge and experience.
Many large organizations will already have corporate strategy and portfolio management
processes in place, alongside different types of CoEs and shared IT platforms. It is important tostress the articulation for questions outlined above, and the answers to these questions. This will
form a solid basis from which the management team can derive a vision, goals, and guiding
principles for its IIoT activities.

4.2

SYSTEMATIC MANAGEMENT OF INDUSTRIAL IOT PORTFOLIO

A particularly beneficial course of action involves implementing frameworks and processes for
tracking IIoT projects from conception through to live operations, including validation of results,
to ascertain whether individual IIoT projects have achieved what they set out to achieve.
This kind of tracking should ideally include portfolio management and progress tracking, andbudget tracking and overall roadmap. We discuss these two elements in turn.
4.2.1 PORTFOLIO MANAGEMENT AND PROGRESS TRACKING
Accurate IIoT project portfolio tracking is needed to support sales and marketing activities, andfor overall business management. It is also an important input for corporate budget planning anditerative refinements of corporate strategy.
As project portfolios and timelines are subject to updates and refinement as organizations
discover barriers or restrictions to deployment, it is essential that this type of information makeits way to some kind of corporate overview dashboard.
The best way to achieve oversight capability is by establishing a traditional ‘program office,’
supported by both technical experts (embedded in the wider business) and dedicated businessanalysts. One of its tasks is to ensure that IIoT initiatives are refined and rescheduled when
IIC:PUB:B01:V1.0:PB:20161115- 21 -

Business Strategy and Innovation Framework
roadblocks or other limiting events occur, and to support the ongoing optimization of thestrategy. Consolidating these activities into a single office assists with the spread of knowledge
and best practices within the enterprise.
Within large organizations, multiple IIoT business opportunities and ongoing projects may haveto compete for resources such as developers and subject-matter experts. When implementing
IIoT solutions, it is important to plan and track both the portfolio of opportunities and theunderlying IoT services enabling them.
IT capabilities will also affect business model development. In enterprises whose strategy follows
a resource-based view that leverages specific capabilities to develop new opportunities, the IT
roadmap will affect the assessment and further evaluation of business models. Enterprises whose
strategy follows a more market-based view will require development of new capabilities basedon their targeted business models. In both cases, IT portfolio managers should be included inbusiness model development to ensure alignment between the various IIoT solutions. Thisguarantees that all parties share a common understanding of the business value of each solution.
Techniques such as value-benefit analysis or the analytic hierarchy process can be applied in thebusiness model evaluation phase. Both use weighted scores to evaluate how alternatives
perform with regard to quantitative and qualitative goals. Evaluation criteria for IIoT applications
include market potential, technological feasibility, and statutory regulations in different
environments. For more detailed analysis of both value-benefit analysis and analytic hierarchy
process, see Kim and Kim (2016) [SK1].
Portfolio management should span the entire lifecycle of IIoT solutions, with different
management techniques required for each phase. While the techniques mentioned above are
relevant for the business modeling phase, it is still important to track the performance of
products and solutions once established. KPIs must be continuously tracked and adjustments
made where necessary.
Figure 4-1 below summarizes the central process within enterprises of identifying, selecting, andprioritizing IIoT opportunities and developing a roadmap with an optimized portfolio. Reassessing
existing opportunities and identifying new ones are important elements in the process ofcontinuous innovation.

IIC:PUB:B01:V1.0:PB:20161115- 22 -

Business Strategy and Innovation Framework

Figure 4-1: The identification, selection, and management process for IIoT opportunities(Source: Machina Research, 2016)

4.2.2 BUDGET TRACKING AND OVERALL ROADMAPA closely related issue is the need for budgetary tracking and overall roadmap management for
IIoT initiatives. IIoT projects can often encounter unexpected roadblocks or limitations as they
evolve from idea to commercial reality. This is due to three main reasons:

IIoT is new and few widely adopted standards exist,
the need to work with partners and a wider ecosystem of providers in an more way andmany IIoT applications represent radical shifts from generally accepted ways of doing
business, and so in themselves might significantly influence end-market dynamics.

In many cases, there is a temptation for project teams to push for increased budgets, delayed
timeframes or reduced functionality. Any current-day IT development project is subject to thesame kinds of stresses, but, the risk and materiality of such effects is likely to be greater in an IIoT
environment due to its relatively nascent stage of development.
For these reasons, it is particularly important to establish an effective budget tracking and overallroadmap function to ensure that IIoT projects deliver the returns that were envisaged at sign-off(unless these goals have subsequently changed). Such monitoring should extend through the
project lifecycle and into the commercial deployment phase, so that the actual results achievedby IIoT initiatives can be tracked and demonstrated. Additionally, any ‘lessons learned’ can befactored into future planning cycles.

IIC:PUB:B01:V1.0:PB:20161115- 23 -

Business Strategy and Innovation Framework
A corollary to this is that many companies may find it advantageous to ‘start small,’ to increase
the overall level of knowledge within the organization, before tackling bigger, more complex, or
more risky projects. This approach will effectively de-risk an overall IIoT strategy by increasingawareness of concepts such as the potential OT impacts of IIoT projects, data movement, storage
and security, and the complex dynamics of collaborating to support IIoT solution deployment.

IIC:PUB:B01:V1.0:PB:20161115- 24 -

Business Strategy and Innovation Framework

5 INDUSTRIAL IOT BUSINESS MODEL INNOVATION
Once an enterprise has established an IIoT strategy and corresponding
goals, it should put robust systems in place to actively identify, assess
and initiate IIoT opportunities.

The best approach to generating ideas and managing new opportunities includes optimization
measures and business model innovation. We use here Alexander Osterwalder and Yves
Pigneur’s definition of a business model, in which “a business model defines the rationale of how
an organization creates, delivers, and captures value.” [AO1]
With increased digitization, we observe a shift from linear value chains to value creation withina network of stakeholders, both internal and external. As a result, multiple interested parties willneed to streamline their efforts to maximize value for the target customer and end user. It istherefore crucial to think in terms of ‘value networks’ when defining business models. The
following diagram illustrates the specific nature of an IIoT business model:

Figure 5-1: The specific nature of IIoT business models (Source: Bosch Software Innovations, 2016)

Because of the prominent role of IT in the IIoT, it will be even more important to close any gaps
or adjust any misalignments that exist between business and IT groups within an organization. In
the following sections, we will present a number of common methodologies and techniques thatwill help enterprises to align these domains.
One approach that enterprises may find helpful when pursuing ideas and designing businessmodels is the IoT Business Model Builder developed by the University of St. Gallen and Bosch
Software Innovations [BSI1]. Although this procedure model relates to the wider IoT in general,
IIC:PUB:B01:V1.0:PB:20161115- 25 -

Business Strategy and Innovation Frameworkrather than the IIoT specifically, it is relevant to both types of project. The model covers the entire
process from the initial idea through to business model evaluation, and provides a number of
useful tools.

Figure 5-2: IoT Business Model Builder (adapted from [BSI1])

This network-centric approach is based on the premise that each stakeholder contributing to the
IoT solution has a specific business model and business case for its own organization. Any joint
business model encompassing multiple stakeholders must unite all relevant aspects in a joint
business case that captures the costs of each partner. The IoT Business Model Builder provides alist of helpful techniques for designing business models within partner networks.

5.1

IDEATIONEnterprises will typically identify IIoT application opportunities
through an iterative process that starts and ends with the generation
and refinement of ideas. Two drivers motivate this process: the first
involves exploiting IIoT technologies to optimize production; thesecond involves the creation of solutions based on innovative businessmodels. We examine each of these elements in more detail.

IIoT applications can unlock a wide variety of benefits, including (but not limited to) the following:

cost and revenue optimization,
operational efficiency,

IIC:PUB:B01:V1.0:PB:20161115- 26 -

Business Strategy and Innovation Framework

real-time business insight (decision-making),
new market and customer experience improvement,
new services andsocietal improvements.

When initiating the IIoT opportunity discovery process, there are two fundamentally different
objectives to consider:

leveraging IIoT technology for production optimization andinvestigating new IIoT business model opportunities.

Compared to product optimization, new IIoT business model opportunities are generally at an
earlier stage and have the potential to be more disruptive to current business practices. The
specific objectives of the enterprise in question will formulate techniques used to identify IIoT
opportunities, as described below.
Like all projects, IIoT projects must start with an idea. The difficulty is that the potential of the
IIoT is vast and as not yet fully understood, meaning almost all IIoT projects are ground-breaking
to some extent. Clear development paths to follow are not yet commonly available, and ideas
can emerge from any part of the organization. Enterprises seeking to engage in the IIoT should
therefore draw on as wide a pool of talent and knowledge as possible when identifying potential
projects. For instance, analogies drawn from IIC use cases, best-practice implementations, andlessons learned from IIC testbeds or other enterprises might serve as good starting points.
Benchmarks with competitors or other industries may also offer inspiration in this early phase ofinnovation. An outward view should be taken, by conducting interviews with, for example,
industry experts, clients and suppliers.
The overall objectives underpinning any specific IIoT initiative (whether the aim is to optimize
production or to explore new business models) will determine which analysis techniques toapply.
5.1.1 PRODUCTION OPTIMIZATION
Where the objective is optimization, the most effective technique for idea generation is to follow
a structured approach deriving ideas from a specific context. Examples include analyzing theenterprise’s overall value chain, value streams on the shop floor, processes and value drivers forimportant performance indicators (KPIs). Classic Business Process Management (BPM) applies
techniques to assess the optimization potential of each idea and the process should start byfocusing on the current portfolio of products and services provided to existing customers.
5.1.2 NEW IIOT BUSINESS MODEL IDEATION TOOLSIn the context of new IIoT business models, an open process for generating innovative ideas for
IIoT solutions should draw on the potential of employees, customers and developers.
Tools that support the idea generation process include traditional creativity methods such as
random input (confronting the idea with random items), brainstorming (formulating ideas for
IIC:PUB:B01:V1.0:PB:20161115- 27 -

Business Strategy and Innovation Frameworkspecific questions), brainwriting (also known as 6-3-5 method, where ideas are generated fillingout a sheet by 6 persons, changing the sheet 3 times limiting the working time to 5 minutes).
More IIoT-specific exercises, like confronting the idea with business model patterns involving“sensors as a service” or “digitally charged products” are also worth considering as part of theprocess of identifying new opportunities [EF1].
The five IIoT Layers (physical thing, sensor/actuator, connectivity, analytics and, digital service)help determine on which specific value-creation layer the opportunity should focus. It illustrates
the range from product focus up to digital services [EF1].
After formulating an initial idea, a pre-evaluation step should be carried out. Capturing theessence of potential ideas in a structured manner1 allows enterprises to compare and preevaluate the various ideas generated.
At this early stage, promising IIoT ideas are usually selected by means of a vote or other informal
method that captures the consensus among the innovation teams. At a later stage, after
developing the candidate ideas in more detail, more formalized evaluation methods can be used
(decision support tools such as scorecards based on internal enterprise standards).

5.2

PREPARATION
Selected ideas should then be analyzed and documented in detail tosharpen focus, derive underlying assumptions (market attractiveness,value proposition, or technical implications, etc.), and assign actions tovarious team members to validate these assumptions.

After describing the IIoT solution, mapping techniques should be applied to help to break down
the value proposition into features that correspond to stakeholder’s perceived benefits. This is ahighly iterative process, as the early-stage nature of IIoT dictates that some ideas will turn out tobe less promising than expected, while other new, more innovative ideas may emerge along theway. Again, validating assumptions, for example by collecting early user feedback helps toprioritize value drivers. The targeted solution should then be described in a holistic way:
Sketching the solution from the user´s perspective by describing the customer´s journey with all
relevant touch points and activities delivers insights about the required capabilities (in terms oftechnology, know-how and resources). The capability assessment helps to differentiate whichparts of value creation the focal company can perform and which parts performed by partners.
With a number of different parties contributing to any IIoT solution (including sensor providers,
production plants, telecommunications providers, etc.), it is crucial to involve each of theseparties in the refinement stage of the planning cycle. These players will need to coordinate theirefforts to create maximum value for the target group(s).

1

One possibility is to use the ‘IoT Shamrock’; see the IoT Business Model Builder [BSI1].

IIC:PUB:B01:V1.0:PB:20161115- 28 -

Business Strategy and Innovation Framework
At this point in the process, value propositions should be devised for all relevant stakeholders in
the value creation network. When designing a network-centric joint business model, a goodstarting point can be to document value streams and analyze potential stakeholder roles. Figure
5-3 below illustrates a value-creation network centered on a product manufacturer.

Figure 5-3: Value-creation network for an IIoT solution

As the business model matures, the business roles adopted by each stakeholder become more
apparent. In the example above, the product manufacturer acts as the business owner (the party
coordinating the business model). Partners such as the telco operator are participants in thevalue-network and are exposed to a higher degree of risk than suppliers who deliver products orservices under contractually predefined conditions.
Depending on the value proposition devised for each stakeholder, different levels of engagement
can be identified. This determines how active each stakeholder should be in the businessmodeling phase (for example, partners should be involved at an early stage, suppliers later). Eachstakeholder has their own business model in mind and must be aware that relevant aspects need
to be brought together with inputs from different stakeholders for the joint business model andbusiness case. Data access and the potential for different network partners to share customer,
usage and other information within the network is a key consideration.
Coordinating such value networks comes with high transaction costs and requires a cultural shift
within organizations toward increased openness and collaboration. Nevertheless, businessmodels with a well-balanced network of partners are likely to prove more robust in the long term.
In the future, as cross-domain IIoT solutions emerge, partnering capabilities will play an evengreater role in achieving business success.
IIC:PUB:B01:V1.0:PB:20161115- 29 -

Business Strategy and Innovation Framework

5.3

EVALUATIONThe range of opportunities associated with IIoT is so vast that one of
the most important tasks facing enterprises is to assess and prioritize
the potential opportunities in an effective way.
This section examines three methods to narrow the list of candidates:
business case calculation, business case challenges and impact and risk
assessment

5.3.1 BUSINESS CASE CALCULATION
After calculating the total cost of ownership of the solution for all parties in the network, allocate
the expected returns among the various stakeholders appropriately. This may require an extreme
degree of openness and cost transparency between the parties, which underlines the importanceof trust and strategic partnerships within the ecosystem.
Historically, most IT business cases were analyzed on a standalone basis, not in the context of an
overall enterprise strategy. For an IIoT business case, an enterprise must consider how its
business might perform should it decide not to adopt IIoT concepts. It must also ‘share’ the costsof developing generic IIoT capabilities among current and future IIoT projects. Often, the businesscases that underpin IIoT projects are more analyses of existential questions than simple analysesof costs and revenues.
One consequence of this is that business cases for IIoT initiatives should account for twoelements: first, the ‘local’ ROI based on direct costs and revenues (including the impact of selling
into new markets, an enhanced customer experience and new services); second, the wider
business impact in terms of overall business continuity and operations, market reach, andcompetitiveness (see Figure 5-4 below). In many cases, it will be necessary to adopt IIoT initiatives
to maintain competitive positioning, rather than to generate significant new returns.

Figure 5-4: Business case context (Source: Enterprise-IoT.org)

Use a range of real options for both ‘local’ and ‘overall’ business cases to assess the benefits of acandidate concept in the context of various specific market development scenarios. Then assign
probability values to them to gain insight into expected benefits and potential downside risks.
Assess the potential for ’local’ business models enabling subsequent ones. Reusing assets suchas infrastructure and data is common in the IIoT world. For example, combining data generated
IIC:PUB:B01:V1.0:PB:20161115- 30 -

Business Strategy and Innovation Framework
by connected devices to create new value-adding information can lead to the creation of newservices. 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 havechanged the laws and economics of hardware development, but the costs of creating reliablehardware for deployment are still high. They include the initial design, prototyping, testing, andcertification phases, as well as integrating IoT capabilities into existing hardware. Many IIoT
business cases require significant initial investment before any revenue generation, and businessmodels 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-basedmodels, but these models usually encounter severe customer acceptance challenges, especiallywhen 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 theeffectiveness of a structured process for business case development, and clarify why thesebusiness 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 thesystematic modification of important quantitative assumptions to assess their effect on theoutcome [BD1]. Since future value streams are subject to uncertainty, the assumptions
underpinning the business case should be documented clearly and linked to the business casecalculation. 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 forsensitivity 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.

1

For further information and specific examples, please refer to Felix Wortmann on Enterprise-IoT.org[FW1].

IIC:PUB:B01:V1.0:PB:20161115- 31 -

Business Strategy and Innovation Framework
As the overall project progresses, those involved will gain a deeper understanding of the initialidea, which will necessarily undergo a process of refinement. The objective of this refinement
phase may be to hit specific budget targets in light of clearer operational constraints, ensurecompliance with statutory regulations or accommodate partners’ technical limitations.
The key to impact analysis is to discern the degree of elasticity in a technical specification, andthe extent of compromise needed to meet budgetary constraints, particularly in the face ofchange. For instance, it may transpire that data sovereignty regulations limit the scope of
potential solutions in ways that were not envisaged when the initial business case was developed,or that certain planned Quality of Service (QoS) levels may not be achievable (due to limited
connectivity, for example). It’s difficult to conceive of all the potential problems that can crop up
and blow an IIoT project off its budgetary course—and that’s precisely the point: IIoT businesscases need to be structured in a way that allows analyses of the best way to achieve compromise
between technical constraints and available budgets. Business planners need sufficient detail
within the overall context. This allows them to discuss descoping possibilities with downstream
project managers.
A related issue is security: the level of security deployed as part of an IIoT solution should be
subjected to a specific risk- and scenario-based analysis. The transformation of business systems
that will take place under a new IIoT regime will bring new types of risk that have not beenpreviously considered in the context of more traditional IT projects.
Lastly, there is significant potential for new or different business models to materialize once afoundational IIoT infrastructure has been put in place. For instance, a manufacturing company
that has set up a fully connected, automated production line might consider a new businessmodel that brings the customer into the production process as a decision-maker, with the ability
to adjust their preferences at the time of production. These post-investment opportunities forbusiness models should be analyzed using standard evaluation tools, for instance by extending
net present value calculation to include real-option approaches. Scenario planning can elaborate
on future possibilities and develop a business model roadmap.
Scenario planning can also serve as a helpful tool for reducing risk. Based on the assumptions
underlying the business model (such as the target group, timeframe), determine various futurescenarios and the most effective business model response. It is particularly important to explore
those elements of the business model that have impact and value, both in the context of a specificscenario and the overall strategy. Engaging in this level of rigorous strategy planning and scenario
analysis enables enterprises to develop a future-proof business model.

IIC:PUB:B01:V1.0:PB:20161115- 32 -

Business Strategy and Innovation Framework

5.4

INITIATION
IIoT opportunity initiation involves restructuring the enterprise’s
internal execution capabilities in a way that enables deployment of
IIoT hardware and software specialists as effectively as possible.
The cultural challenges associated with multidisciplinary project teams
are an important facet of this process, as discussed below.

5.4.1 INTERNAL ORGANIZATIONAL SETUP
The ideal organizational setup and execution strategy for any given IIoT project (or wider IIoT
strategy) must be considered in parallel with development of the business plan.
While time-to-market factors are important here, it is also necessary to look critically at internal
execution capabilities. Given the trend of software companies migrating into hardware, andhardware companies migrating into software, most organizations are unlikely to already havesufficient hardware and software specialists available in house to provide adequate support for
their IIoT project portfolio. In addition, there may be a negotiated cultural shift, whereby
software companies implementing IIoT projects are faced with longer project implementation
times than normally experienced. The reverse also applies to hardware companies. Furthermore,constraints specific to standard hardware and software projects still apply.
Typical deployment options include setting up an internal project, acquiring an external
company, or establishing a spin-off company. It is also common to see a mixture of these models,
whereby the enterprise sets up an entity comprising people with roots in the wider organization(ideally from both IT and OT) and those that have come in through acquisitions. Recently, theterm ‘acqui-hiring’ has become popular to describe a strategy of acquiring companies for theirteam and talent, rather than their products and customer base.
Organizational setup is an area that requires careful attention, especially for IIoT opportunities
that developed from existing internal organizational capabilities. In particular, it is essential tomaintain the interfaces and relationships between the solution team and members of theexisting asset organization, which may be a potential source of friction.
A number of enterprises in similar situations are experimenting with ‘podular’ organizational
structures that allow for ongoing engagement in a project concept as it progresses from ‘idea’ tocommercial reality and gains traction across the organization.
5.4.2 INORGANIC TECHNIQUES
Where there is a need to compensate for shortfalls in organizational capability, enterprises cantake tactical approaches such as ‘acqui-hiring’ or the more ‘standard’ acquisition process.1

1

We do not discuss acquisition approaches further here, since these have been comprehensively
documented elsewhere in a wide range of business texts.

IIC:PUB:B01:V1.0:PB:20161115- 33 -

Business Strategy and Innovation Framework
Another approach that has come to characterize the IIoT space is ‘partnership.’ It is generally
recognized that the opportunities associated with IIoT are so vast and diverse that few
enterprises today have the breadth and depth of expertise required to exploit the opportunities
available fully. Realizing the IIoT opportunity depends on effective use of internal assets, andintegration with external assets controlled by third parties. The partnership approach allows
enterprises to share capabilities in a relatively flexible way, yet with a level of commitment that
falls short of full acquisition.
Third-party companies may enter into partnering arrangements for a variety of reasons:









enterprises that are already working in close cooperation may perceive they have no
choice other than to become IIoT partners, as there is too much to lose in not doing so.
enterprises may align with each other on the strategic basis of a shared vision,enterprises may engage in partnerships simply to capitalize on a standalone opportunitythat neither can readily execute without the other,partnering arrangements may de-risk a deployment, leading to better alignment of risks
and rewards,
capability shortfalls; these are particularly common as hardware companies increasingly
seek to develop software, and vice-versa,
a partnership arrangement may be necessary to compensate for a resource shortfall incapability or volume
the improved information flows inherent in a partnership arrangement may afford
opportunities for increased efficiency, flexibility and responsiveness andimproved information flows between partners lead to increased transparency between
enterprises, potentially allowing for the development of better products and services in
the medium term.

As is evident from the list above, ‘IIoT partnering’ where companies execute and go to market
together is significantly different from the more traditional vendor-supplier partnership model.
Notwithstanding these motivations, partnership arrangements can also be more effectively
realized in the form of mergers or acquisitions, albeit at significantly higher levels of risk (for oneof the partners, at least).

IIC:PUB:B01:V1.0:PB:20161115- 34 -

Business Strategy and Innovation Framework

6 INDUSTRIAL IOT FOUNDATIONAL CAPABILITIESThe process of business model innovation relies on investing incapabilities across multiple initiatives with synergy effects.
The two foundational blocks are an IIoT Center of Excellence (CoE) andan IIoT platform.

6.1

INDUSTRIAL IOT CENTER OF EXCELLENCE

While not strictly required to launch IIoT projects on an individual scale, many enterprises willfind it beneficial to develop an IIoT Center of Excellence (CoE). The goal is to create and govern aunified IIoT strategy within the organization and to ensure that knowledge of best practices canbe effectively shared and leveraged across the entire organization. The scope of this CoE canencompass a wide range of activities, including:







identifying and applying IIoT best practices,
enabling change management,
re-thinking business models,managing human resources,
IIoT maturity assessment and
IIoT governance.

6.1.1 IDENTIFYING AND APPLYING IIOT BEST PRACTICES
Given that IIoT concepts are sufficiently new and different from ‘business as usual,’ enterprises
may find it beneficial to implement or expand initiatives to track IIoT best practices. This should
be configured as an internal CoE staffed with experts who ‘live and breathe’ IIoT concepts andare capable of guiding their peers in the wider enterprise. Typical functions could include:
Support: A CoE should support business lines in realizing opportunities through the provision of
IIoT-specific consulting services. These services may include business case creation, project setup
and IIoT project execution coaching.
Guidance: An CoE should help define the range of standards, methodologies, tools, andknowledge repositories required to support an enterprise’s overall corporate strategy. A numberof these elements will be highly vertical-specific; some of the more horizontal aspects could bestandardized.
Shared learning: Training, certifications, skill assessments, team building and the formalization ofroles are all established methods that can be applied to the development of IoT capabilities.
Measurements: An CoE should create IIoT-specific metrics and maturity models that help makethe progress of the enterprise’s transformation more transparent.

IIC:PUB:B01:V1.0:PB:20161115- 35 -

Business Strategy and Innovation Framework
Governance: The CoE should coordinate across projects and perform detailed governance tasks.
In the connected IIoT world, there is always a high degree of cross-dependency between projects
that should be managed carefully.
Clearly, establishing and maintaining a dedicated IIoT CoE will involve a significant investment,
and several enterprises have reported mixed results from CoE initiatives. It is important to ensurethat project teams view the CoE as a means of adding value, and not as a disturbance. There areusually two options for setting up an internal CoE: either appoint a team of dedicated CoE
resources, or opt for a ‘virtual’ CoE with members embedded in operational teams, spending acertain percentage of their time supporting the CoE’s activities (or some hybrid blend of these
two approaches). The advantage of the latter option is that the CoE members are experts from ahands-on project background with a great deal of relevant experience. A potential drawback isthat these highly respected experts could treat project work as a priority, which may compromise
their ability to meet their part-time CoE obligations.
6.1.2 ENABLING CHANGE MANAGEMENT
IIoT has the potential to bring transformational change to a significant portion of the businessmodel, including decision-making, business processes, employee roles, staffing, operations,strategy, customer value, customer experience and even the overall enterprise architecture.
Many of these changes will be disruptive to traditional business execution, but all have thepotential to exert a positive impact on the business. Understanding the changes, thinking about
each one in both traditional and new ways, and finding ways to adapt and capitalize on them isessential to an enterprise’s ongoing business operations, competitiveness, and longevity.
6.1.3 RE-THINKING BUSINESS MODELSIIoT requires enterprises to rethink their current business models. This is necessary regardless ofwhether they actually adopt IIoT solutions internally: industry is moving toward IIoT adoption,and enterprises that keep pace with this trend will undoubtedly have a strong competitive
advantage.
In operational terms, connection and integration of factory-floor elements yields production
efficiencies. Timely, enhanced decision-making at all levels of production lays the foundation forimprovements in the broader production process. In the longer term, IIoT opens the door to
greater integration between organizational, system, process and data elements. This will have an
impact across the entire enterprise, from the factory floor to the overall IT infrastructure.
Business models must consider this end-to-end impact.
Industries with a more service-based approach, such as healthcare, education and retail, will
benefit from the integration of data from a wide range of devices, both internal and external.
Enterprises will need to adjust their business models to expand their focus from operations tooffering new services or improving current ones. While operational factors will continue toinform a significant part of the business model, it is beneficial to add a strategic ‘what is possible’
view.

IIC:PUB:B01:V1.0:PB:20161115- 36 -

Business Strategy and Innovation Framework
For example, a business model for a retail company could be adjusted to reflect current andpotential data sources, new technologies such as location services and radio-frequency
identification (RFID), integration with customer devices such as cellular phones, movement ofcustomers within stores, and the role of social media. By exploiting IIoT to create new services
and experiences, the retail store of the future will become a place to add value.
This new business model could result in improved day-to-day operations, improvements incustomer service, a reshaped store experience, a more expedient checkout process, or the
possibility of targeting customers with customized product offers and marketing in real time,
both within the physical store and at home.
In strategic terms, while traditional business model considerations will still be pertinent as IIoT
takes hold, enterprises must also think of new ways to add value as part of their businessdevelopment strategy. No longer constrained by what is possible, they must now embracetransformational change and consider a business model that includes what might be possible.
Connected and intelligent devices allow just about anything to be connected, offering both apotential source of business insight and a chance to develop new products and services that canlead to improved opportunities for the enterprise within the relevant market segment.
IIoT is set to affect all business segments in similar ways.
6.1.4 MANAGING HUMAN RESOURCES
IIoT creates a need for both deeper and entirely new skill sets in technology and services.
Enterprises can obtain these skill sets by providing professional development and retraining
opportunities for current staff, or by hiring externally. Enterprises that are not large enough tohave dedicated development staff, or that want this expertise outside of the organization, canengage the services of outsourcing companies specializing in IIoT development or
implementation. Hybrid situations are also possible, providing some elements in-house withothers supplied externally.
If enterprises require new technology and service expertise within their organization, they will
also need to consider modifying existing employee roles or adding new ones. Enterprises thatwish to have internal resources in place for IIoT development and implementation will need toattach greater importance to aspects such as specific technology considerations (networking andsecurity, for instance), project skills, software development, analytics, and business modelingwhen training and hiring personnel. There is a need for employee retraining as initiatives develop
within an organization, particularly at the operational level (such as the factory floor), once
systems, devices, and machines can make real-time decisions.
At a societal level, IIoT and consumer IoT creates a need for more advanced technical education
to support these roles.
6.1.5 IIOT MATURITY ASSESSMENT
An IIoT maturity assessment is a valuable tool with a variety of uses. It comprises a framework
for rigorous and comprehensive determination of the overall level of adoption. It may include a
IIC:PUB:B01:V1.0:PB:20161115- 37 -

Business Strategy and Innovation Framework
parallel analysis to identify best practices for the deployment of IIoT concepts among competitors
and the wider industry as a whole.
Ideally, the scope of an IIoT maturity assessment should not be restricted to the industry in which
the enterprise operates. It should include within its remit the identification of best practices fromother industries, in particular adjacent and broadly comparable industries.
A context in which an IIoT maturity assessment is particularly useful is the CoE. It provides input
for several different areas within the organization, including:







strategy planning,
IIoT project portfolio planning and ideation,business case and scenario planning,achieving internal stakeholder and third-party buy-in,internal change management anda range of specific overall corporate development and project-based issues.

The CoE is best positioned to develop and ‘own’ the maturity assessment tool. Internal
consultants in particular, and other CoE staff in general, are ideally placed to analyze the overalllevel of IIoT development prevailing within their industry, and the degree to which it might apply
to their own organization.
In particular, members of the IIoT consulting group should devote part of their time to analyzing
the wider industry in which their enterprise operates. They should seek to identify best practices
and assess the overall maturity of IIoT concepts within the industry, with a view to outlining along-term IIoT scenario for their industry.
6.1.6 IIOT GOVERNANCE
To embrace the shift toward IIoT, enterprises must harness the combined value of IT and OT.
Necessary considerations include appropriate governance and common methodologies.
In practice, enterprises may well continue to plan for IT and OT separately to account for the
specific day-to-day objectives of each domain. Governance structures should optimize using
elements in both. These elements include:







operational objectives and data,
overall business strategy and market objectives and data,
more specific objectives for lines of businesses (LOBs) within the company,
existing and developing standards for OT, IT and IIoT within the company,
IIoT strategy and objectives andany internal program development.

This approach is particularly relevant and necessary for data that might flow to and from both IT
and OT domains, and may provide a unified view of all data across the organization.
The governance structures put in place within an enterprise should include both IT and OT
representatives within the IIoT solution team. Input from the various lines of business (LoBs)
IIC:PUB:B01:V1.0:PB:20161115- 38 -

Business Strategy and Innovation Framework
within the enterprise is also important to direct the specific requirements and applications of IIoT
solutions, and ensure that all parts of the overall organization work together to define how thisshould benefit all elements of the business. This collaboration also provides for proper budgetingof resources and development and ensures an equitable and effective use of resources.
This governance approach ensures representation of all elements of the business and that allelements are working together within the enterprise toward a unified view of IIoT introduction
and implementation. It also ensures data and insight are used to benefit the entire business endto-end.

6.2

INDUSTRIAL IOT PLATFORM

The second foundational block underpinning the IIoT implementation framework is the IIoT
industrial platform. In this section, we address three IIoT platform implementation issues.
What is an IIoT platform?
IIoT platform selection parameters
Standards in the IIoT

6.2.1 WHAT IS AN IIOT PLATFORM?
From a functional perspective, an IIoT platform is a technical system that provides a range ofenabling services to support the delivery of IIoT applications.
In the context of the IIC’s testbed initiative, individual (vertical) applications such as asset
efficiency management, micro-grid controllers, and factory operations rely on IIoT platform
services to deliver robust, scalable, and secure applications to end users.
Figure 6-1 below illustrates the platform support requirements of an IIoT solution in relation tofour applications, Apps #1 to #4. Each IIoT application communicates with its respective devices
and sensors, via an enabling IIoT platform. Thus, App #1 communicates with Device A and Device
B.
Many IIoT systems operate on common infrastructure in the form of wide-area communications
networks and cloud-computing platforms. However, while App #1 and App #2 share common
infrastructure and services on Platform A, they do not interoperate. The term ‘silo solution’ is acommon characterization of the combination of elements that constitute such an IIoT application
stack.

IIC:PUB:B01:V1.0:PB:20161115- 39 -

Business Strategy and Innovation Framework

IIoT Application Stack and Interoperability Dimensions
App #1App #2App #3App #4

IIoT Application Stack

Interoperability Dimension
IIoT Platform
Services

COMMONSERVICES

IIoT Platform
Services

IIoT Platform
Foundation

COMMONINFRASTRUCTURE

IIoT Platform
Foundation

IIoT Platform A

Device A Device B(App #1) (App #1)

Device C(App #2)

IIoT Platform B

Sensor D(App #2)

Device E(App #3)

Sensor F(App #3)

Sensor G Sensor H(App #4) (App #4)

Figure 6-1: High-level overview of key IIoT platform components(Source: Adapted from IIC Open Horizontal testbed program [IIC2])

Each IIoT application depends on a platform foundation and a set of platform services.
The platform foundation provides the basic processor, network and system software needed tohost the IIoT platform services. From an application perspective, the platform may involve an
Infrastructure-as-a-Service solution (IaaS) or a hosted solution (public/private cloud, selfmanaged/third-party-managed, on-site/remote cloud, etc.).
IIoT platform services comprise two service groups.
Connectivity-management services include the functions needed to connect a device or sensor
to a network and then manage its communications behavior once in operation. Device lifecycle
management is an important support function and includes pre-provisioning (for device testing),
service provisioning, activation, ongoing device management, in-operation status monitoring anddecommissioning activities. User tools, such as management dashboards, visualization aids andservices for remote troubleshooting are another important aspect of connectivity-management
services.
Application-enablement services provide an environment for developers and users to develop,
deploy, and manage IIoT applications. Developer environments provide services for managing
data feeds and performing quality-control checks. Application-enablement services help users
implement the application logic and business rules that enable a connected device to fulfill
control-action and alarm-notification objectives.
Together, these two categories of platform service offer a wide range of capabilities comprising
the items in Figure 6-2:
IIC:PUB:B01:V1.0:PB:20161115- 40 -

Business Strategy and Innovation Framework

Portal/UX
Services

Resource
Discovery

Application
Management

Data Analytics &Presentation

Service Charging& Accounting

Location Services

PolicyManagement

Identity
Management

Registration

Subscription
Management

Group
Management

DeviceManagement

Data
Management &Repository

Communication
Management

Security
Management

Disaster
RecoveryFigure 6-2: Inventory of IIoT platform service functions

These IIoT platform services are common to many IIoT applications. There are standardization
advantages to reusing these services to support multiple applications. Furthermore, their
inclusion in a horizontal platform architecture helps to break down silo boundaries and enables
interoperability1 across applications. ,Consider a scenario where different platforms support multiple applications. Clearly, there are
economic benefits from sharing common infrastructure. More importantly, shared services allow
applications to share data as well as security and identity management credentials.
In practical terms, this would enable the owner of App #1 in Figure 6-1 above to deliver a better
application by incorporating data from one of the devices associated with App #4, for example.
Similarly, an application provider on Platform A could create a completely new application by
combining sensors and other data sources from Apps 1#, #2 and #3. The presence of common
service functions in a horizontal IIoT platform architecture makes this possible. These examples
illustrate the case where a horizontal platform supports multiple interoperable verticalapplications. In a market where several vertical and horizontal platforms exist, horizontal
platforms also enable cross-platform interoperability.
Interoperability is particularly relevant in industrial environments. Construction sites, farms,
manufacturing plants and transport hubs all offer significant opportunities for sharing sensors,data and computing resources.

1

For the purposes of this discussion, we do not distinguish between interoperability and interworking.

IIC:PUB:B01:V1.0:PB:20161115- 41 -

Business Strategy and Innovation Framework
Interoperability is also a driver for the development of new and innovative applications acrossclusters of stand-alone silo applications.
6.2.2 IIOT PLATFORM SELECTION PARAMETERS
When designing IIoT applications, the IIC’s IIRA [IIC1] recommends that industrial users should
consider business, usage, functional and implementation perspectives.
In the case of IIoT platforms, each of these perspectives has a tactical and strategic component.
An operational solution intended for a rapid market launch might require a customized IIoT
platform (e.g. for a one-off, capital-intensive machine in a factory environment). Over the
medium to long term, this approach is not ideal if the platform requires customization to support
new IIoT applications, such as interoperating with other machines or an entire assembly cell inthe same factory environment. The table below highlights the main tactical and strategic
platform selection considerations from each of the IIRA’s main viewpoints.
IIRA viewpoints
Business

Usage

Functional

Implementation

Tactical considerations

Strategic considerations

 Platform supports immediate IIoT
application requirements
 Platform demonstrates implementation
track record Adequacy of duty-cycle loading Dynamic response capabilities (i.e. from
non-time-critical responses to real-time
responses)
 Support for highly automated (rules
engines, protective overrides) and humanoperated (visualization, intervention
controls) usage environments
 Functional alignment between platform
feature set and usage priorities Platform offers resource re-use capabilities
 Visibility in terms of platform roadmap(new capabilities, protocols, and support
for interoperability) Extensibility to support use-case evolution(IT/OT integration) as the boundaries of an
IIoT application expand
 Support for new business models (from B2B
to B2B2C, for example)

 Infrastructure choices (on-premise, hosted,virtual environment, etc.)
 Solution choices (in-house, managed
service, etc.)
 Solution provider expertise and viability

 Roadmap for next-generation features andcomposable value-added services(analytics, data monetization, etc.)
 Scope for interoperability across different
layers of the IIoT value stack IIoT application expansion requirements forhybrid platforms (multi-provider cloudcomputing, geographic diversity, etc.)
 Solution multi-sourcing to increasebargaining leverage

Table 6-1: IIoT platform selection considerations

Organizations will base their platform investment decisions on their specific requirements. Some
enterprises may want to invest in a platform to explore the various opportunities presented by
IIoT; others may have a well-defined, long-term roadmap in place. In both cases, enterprises must
be clear on how best to internalize the experience they have gained and simplify its dissemination
to other business units.
Enterprises will often collaborate with specialist service providers in designing and launching
their IIoT applications. It is therefore important to balance business and technology

IIC:PUB:B01:V1.0:PB:20161115- 42 -

Business Strategy and Innovation Framework
considerations, on issues such as adherence to standards-based technologies and membershipof industry ecosystems, when selecting IIoT platforms and service providers.
6.2.3 STANDARDS IN THE INDUSTRIAL IOT
The internet and mobile industries have demonstrated the importance of widely adopted open
standards. They both benefit from a competitive supplier base that encourages innovation andeconomies of scale. As a result, business and consumer users have enjoyed affordable prices forcommunications products and services that have led to near-universal adoption. Standardization
will play an equally important role in securing the long-term success of IIoT.
The number of standards that claim to support IoT runs to many dozens if not hundreds. Often
they apply to specific industries or relate to different layers of the IIoT stack. OPC-UA, forexample, is a specific communications protocol for process control applications, whereas CoAP
(IETF and OASIS) and DDS (OMG) are general-purpose standards for communications and data
management. Both CoAP and DDS were produced by recognized standards development
organizations (SDOs).
Enterprise and industry alliances represent a less formal approach to standardization, achieving
this through de facto solutions or individual certifications. In the smart home domain, examples
include Google’s Thread solution and the approach proposed by the Open Connectivity
Foundation (OCF).1 In the healthcare sector, the Continua Alliance2 has published an open
implementation framework for interoperability between personalized, connected healthcare
devices and solutions. This framework draws explicitly on communications and healthcare
standards produced by SDOs. The Continua Alliance enforces this framework through acertification process.
CoAP, DDS, Google Thread and OCF are examples of standardization that build up from the
networking protocol layer. To ensure end-to-end service quality, IIoT platforms must be able tooperate across multiple devices and sensors using different networking protocols and application
technologies.
The SDO community has begun to address this integration challenge through new IoT
architecture and horizontal platform initiatives. The first step in this standardization process is
usually a review of the market and existing standards. The following timeline maps the activities
of several SDOs in terms of the three main milestones associated with initiating a new standard—
opportunity discovery, IoT program launch, and release of a first deliverable.

1

Merger of AllSeen Alliance (Qualcomm) and OIC (Intel, Samsung) initiatives targeting the home andsmall-office segments.
2
The Continua Alliance recently merged with the mHealth Summit and HIMSS to form the Personal
Connected Health Alliance (PCHA), which operates as a membership association.

IIC:PUB:B01:V1.0:PB:20161115- 43 -

Business Strategy and Innovation FrameworkStages in Developing Standards#1

Opportunity discovery #2

2012

IoT Program launch

2013

#3

First deliverable

2014

2015

2016

3GPP

#2

IEEE P2413#1 First group meeting

IETF

#3

ISO/IEC JTC 1

IoT#1
Review

ITU-T SG20

CORE WG (CoAP, RFC7252)#2

IoT Project
Initiation#2 IoT Study Group with initial focus on Smart Cities

NIST

#2

OMG
oneM2M

Initiate standardization of NB-IoT(NB-LTE/C-IoT)
Define IoT Architecture#2(target)#2 oneM2M Partnership Project launch

W3C

Cyber-Physical Systems
Public Working Group#1

IoT for Smart-cities
Framework#3

DDS (v1.4)#3Standard issued (Release 1)#2

Create IoT
WG Charter

Figure 6-3: Timeline of standardization efforts by IoT service enablers [SDO1]1,
Source: more-with-mobile.com (2016)

oneM2M™, one of a number of bodies focused specifically on common platform services,
launched a market review in 2012 and issued its oneM2M™ cross-industry standard in early 2015.
Other initiatives have delivered formal standards focusing on IoT communications (IETF/CoAP)
and data exchange (OMG/DDS) capabilities.
When enterprises decide to work to a standard, they are making a technical and strategic
commitment. The technical dimension comes from determining whether a given standard isappropriate for the enterprise’s IIoT application requirements. The strategic element relates tothe credibility of the relevant SDO and its ability to manage, maintain and deliver regularenhancements to the core standard over time. Without this, the promised economies of scaleand long-term, features roadmap will not materialize.
Over time, many of the standardization initiatives in the market will converge or find common
ground for collaboration. By way of example, the de facto standards initiatives launched by the
AllSeen Alliance and the Open Interconnect Consortium (OIC) recently agreed to come together
under the Open Connectivity Foundation (OCF). Since then, Google Thread has joined the OCF toform an IoT alliance to advance the adoption of connected home products and make theirrespective technologies fully compatible.
Mirroring the industry alliance sector, collaboration also occurs between SDO bodies. In theinternet domain, for example, the W3C developed the specifications for HTML and otherapplication-level technologies. It has also worked closely with the IETF on interface issues as W3C
standards (such as HTML for web page formatting) run directly on IETF protocols (such as HTTP,

1

Refer to the appendix for descriptions of various SDOs. The graphic encompasses internationallyrecognised standardisation bodiesthat have launched IoT-related initiatives.

IIC:PUB:B01:V1.0:PB:20161115- 44 -

Business Strategy and Innovation Framework
which carries web page information between client and server). Thus, while the W3C and IETF
work closely together, each SDO specifies its own standards.
This collaborative model is likely to prevail for IIoT through a standard for a family of horizontal,
service enablers. These will integrate lower level, communications protocols and standards tocreate a clean interface that IIoT application developers and systems integrators can use.
Over time, standardization will move up the layers of the application stack in areas related toanalytics and semantics, for example, as businesses place more value in applicationinteroperability. Individual organizations should factor this evolution into their IIoT platform
strategies.

Annex A REVISION HISTORY
Revision

Date

V0.1
V0.2
V0.3

2016-03-16
2016-09-07
2016-10-07

IIC:PUB:B01:V1.0:PB:20161115

EditorChanges Made
Released for comment
First full draft, released for comment
Revised full draft, released for comment- 45 -

Business Strategy and Innovation Framework

Annex B ACRONYMS
IIC
IIoT

Industrial Internet Consortium
Industrial
InternetofThings(IIoT)
describes systems that connect and integrate industrial control systems withenterprisesystems,business
processes
andanalytics.
Note 1: Industrial control systems contain sensors and actuators.
Note 2: Typically, these are large and complicated systems.

Industrial Internet of Things (IIoT) Application
describes an instance of an IIoT system deployed for a specific identified
purposeIIC:PUB:B01:V1.0:PB:20161115- 46 -

Business Strategy and Innovation Framework

Annex C GLOSSARY
Industrial Internet Consortium (IIC)
an open membership, international not-for-profit consortium that is setting
the architectural framework and direction for the Industrial Internet.
Founded by AT&T, Cisco, GE, IBM and Intel in March 2014, the consortium’s
mission is to coordinate vast ecosystem initiatives to connect and integrate
objects with people, processes and data using common architectures,interoperability and open standards.
Industrial Internet of Things (IIoT)
describes systems that connect and integrate industrial control systems withenterprise systems, business processes and analytics.
Note 1: Industrial control systems contain sensors and actuators.
Note 2: Typically, these are large and complicated systems.
Industrial Internet of Things (IIoT) Application
describes an instance of an IIoT system deployed for a specific identified
purposeIIC:PUB:B01:V1.0:PB:20161115- 47 -

Business Strategy and Innovation Framework

Annex D REFERENCES[AO1]

Alexander Osterwalder, Yves Pigneur (2010): Business Model Generation: A
handbook for visionaries, game changers, and challengers. (1st ed.).
Hoboken, NJ [ etc.]: Wiley.

[BD1]

BusinessDictionary.com: Definition of sensitivity analysis, available at
http://www.businessdictionary.com/definition/sensitivity-analysis.html[BSI1]

Bosch Software Innovations & the University of St. Gallen (2015): IoTBusiness Model Builder, available online at http://www.iotlab.ch/?page_id=10738[EF1]

Fleisch et al. (2014): Business Models and the Internet of Things, accessible at
http://www.iot-lab.ch/?page_id=10543[FW1]

Felix Wortmann, University of St. Gallen, on: Enterprise-IoT.org (available at
http://enterprise-iot.org/book/enterprise-iot/part-ii-igniteiotmethodology/igniteiot-strategy-execution/se3-iot-opportunitymanagement/)[IIC1]IIC Reference Architecture (available at www.iiconsortium.org/IIRA.htm)[IIC2]IIC Open Horizontal testbed program (2016)[SDO1]

SDO publications, Figueredo @more-with-mobile.com (2016)[SK1]

Suwon Kim, Seongcheol Kim: A multi-criteria approach toward discoveringkiller IoT application in Korea, in: Technological Forecasting & Social Change,
Vol 102, pp. 142-155 (2016)

IIC:PUB:B01:V1.0:PB:20161115- 48 -