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back to index backAMERItalk June,  2017


Middle Market Manufacturers: Surprisingly Suited to Capitalize on IoT Advantages?

Manufacturers are waking up to the Internet of Things (IoT) opportunity. According to BI Intelligence, companies will spend nearly $6 trillion on IoT solutions in the next five years, and by 2020, 24 billion devices will be IoT-enabled. Whether you’re a large-scale global manufacturer or a middle market company in growth mode, the IoT holds promise. While middle market companies may be slower on the adoption curve than their larger competitors, they have a critical opportunity to drive innovation and evolve as IoT leaders rather than followers.

Manufacturing Industry in Growth Mode

With the new administration in Washington and an expected pro-business agenda, anticipation is high for growth in the manufacturing industry. According to the NAM Manufacturers’ Outlook Survey, more than 93 percent of manufacturers feel positive about their economic outlook, up from 78 percent in December. With opportunities for growth within reach, middle market manufacturers will need to shift focus to battle competition and differentiate in the market. We expect an uptick in deal flow and capital investment, and for many manufacturers, investing in the IoT may be just the competitive edge they need.

IoT Adoption Is Increasing, But Strategy Isn’t Keeping Pace

In the new MPI Internet of Things Study, sponsored by BDO, we found that global manufacturers are making significant progress toward IoT integration. Over half of the 374 manufacturers surveyed characterize themselves as IoT-competitive companies, and 14 percent say they’re IoT leaders. IoT-enabled manufacturers are also seeing impressive returns on their investments: 72 percent increased their productivity and 69 percent increased their profitability in the last year by applying the IoT to plants and processes.

Despite the advantages reported, 40 percent of manufacturers do not yet have a strategy in place to apply the IoT to their processes. Whether your organization lacks an IoT strategy, or is in the midst of putting one into action, there are critical components that should be considered in the early stages. For example, our study found that most manufacturers are missing opportunities to take advantage of research tax credits and build in security features. But middle market manufacturers are uniquely positioned to move on the IoT with the right strategy, people, processes and technology to maximize their advantage.

“Crawl-Walk-Run” Mentality Applies to Technology

It’s no secret that middle market companies have to be wise about how they spend and invest. When it comes to the IoT, middle market companies are too big to ignore it, but must avoid mistakes and missteps they can’t afford. Middle market companies often take a measured approach to embracing new technology.

That means investments are often more carefully planned and staged, boding well for success. For executives looking at the IoT, it’s critical to confirm your proposed use cases for the technology will align with your business objectives and drive value. It’s critical to first ensure you have the underlying technology and management systems to enable the IoT, understand its performance and measure KPIs that increase value, margins, sales and shareholder value. You can’t build an effective 21st century technology rollout on 1980s software and systems.

Middle Market Characteristics Create IoT Advantages

Once those initial questions are addressed, middle market manufacturers can capitalize on some of the benefits of their size and market position relative to larger competitors. First, they are nimble and able to get buy-in on transformative projects because change leaders have more access to and attention from the C-suite and board. Projects can move faster because they are one of a few, rather than one of hundreds. Finally, middle market companies have had the benefit of observing competitors’ IoT adaption and can now apply lessons learned and cost-saving strategies to their own initiatives.

But that doesn’t mean manufacturers should charge forward without laying the necessary foundation. Our study found that less than half of manufacturers are considering cybersecurity at the product conceptualization and design stage, missing opportunities to build in security at the ground level. And 58 percent of manufacturers are not planning to claim tax credits and incentives available for IoT investments, meaning many are leaving money on the table that could help fund innovation.

IoT adaption is a marathon, not a sprint. Middle market manufacturers are well-positioned to unlock IoT’s potential given their steady strategic approach and flexibility if they ensure the right systems are in place and the use cases are aligned with value.

Eskander Yavar is a partner and leader of BDO’s Management Advisory practice. He can be reached at eyavar@bdo.com. - See more here.

Source: BDO - GAI



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