Intelligent machines

The Internet of Things revolutionizes industrial-equipment services

Nick Lerner
3 March 2014

3 min read

Steam, electricity and electronics powered the first three industrial revolutions. Now the Internet is driving Industry 4.0, which is revolutionizing industrial equipment and the services that support it with connected, intelligent machine capabilities that can earn profits of up to 30% for machine builders.

By 2020, 30 billion devices – from jet liners to packaging machines – will be wirelessly connected to the Internet, according to ABI Research, a market research and market intelligence firm based in New York City (USA). The trend has significant implications for the industrial-equipment industry; by building intelligence and connectivity into their machinery, original equipment manufacturers (OEMs) can innovate the services they offer, delivering superior customer experiences while generating new, high-profit revenues.

When a piece of industrial equipment is connected to the Internet, it can transmit information back to its builder on everything from wear to production patterns. Such information allows manufacturers to offer proactive services that help their customers avoid downtime and optimize production.

“In many cases, services are of greater importance than the product itself,” said Dieter Spath, former director of Germany’s Fraunhofer Institute for Industrial Engineering (IAO), who left to become the CEO of a high-tech company. Fraunhofer IAO unites research, science and business, Spath said. “Industry 4.0 is gaining momentum across the industrialized world as a new way to deploy the power of the Internet with cyber-physical products in the service of manufacturing.”

By harnessing this capability, industrial equipment manufacturers can supply more services to optimize their customers’ machines. “To remain competitive, companies are putting service at the front of their offering,” Spath said. “It is conceivable that products and equipment may even be given away or subsidized to create demand for more profitable services, so OEMs need to be innovative and agile in their service provision.”


Equipment that continually monitors its condition and reports that information back to its manufacturer also allows OEMs to learn more about how their customers use the machines.

“They can use those insights to provide their users with better machines and services,” Spath said. “For example, it will be possible to remotely oversee, control and schedule thousands of machines across the world from a single location. Machines will self-diagnose and auto-order parts within a connected system. New services will emerge that monitor, regulate and modernize machines and systems, releasing their latent value.”

30 billion

By 2020, ABI Research estimates that 30 billion devices will be wirelessly connected to the Internet.

Willy Shih, professor of Management Practice at Harvard Business School in Boston, Massachusetts (USA), adds that “accumulating large amounts of data from the shop floor is becoming easy and inexpensive. By applying analysis methods, data can be used to do a better job of optimizing production, fault-finding and cutting waste. New services will develop around releasing the value of that data to show machine owners how to improve equipment utilization and increase up-time and system performance to achieve higher levels of productivity.”

Manipulating bigger data sets allows producers to understand the cause and effect of productivity metrics in real time, Shih said. “We have never been able to see so much before. For example, in complex multi-step production, patterns of yield variation can be seen along with their causes. This helps isolate problems and allows companies to take immediate action to solve them. Because customers will pay to reduce downtime and improve throughput, opportunities exist for companies to provide services that collect, interpret and act on this data.”


Such advances in technology are “developing into fertile ground for machine makers to offer profitable new data-based services that make their customers more money,” said John Blyler, affiliate professor of Systems Engineering at Portland State University in Oregon (USA), and vice president and chief content officer at Extension Media, a high-tech publisher.

Blyler points to energy usage in production plants as a case where a connected system could make immediate and widespread improvements. “Companies that help machine users take advantage of cheaper energy could assist them in making less expensive products,” he said. “This means looking at production across a global, system-connected factory and spontaneously changing manufacturing locations and schedules, production layouts, machining cells and supply lines to save energy depending on the energy prices.”


In a recent research report titled “Embracing Digital Technology,” the Massachusetts Institute of Technology (MIT) Sloan Business School and CapGemini Consulting found that only 25% of the global business executives surveyed recognize the potential for digital transformation to launch new products and services, so those who move now will have an advantage.



The report cited General Electric (GE) as a company that has recognized the potential. GE is actively promoting a service strategy “that will help it tell customers how to schedule maintenance and avoid part failures, improving operations. The company expects it will sell services related to maintaining its products.” GE’s plan is just one example, the report found, that “the opportunity for digital technologies to create new businesses is real.”

Industrial-equipment manufacturers that fail to step up to the challenge, however, can expect even more difficult times ahead. Blyler predicts: “Ignoring this trend could prove disastrous for machine makers as valuable profit centers are eroded by more efficient rivals and newcomers with innovative service models keen to own this increasingly dynamic sector.”

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