Industry 4.0 • November 17, 2021

How Can Data Monetization Drive Growth?

How Can Data Monetization Drive Growth?

According to market research firm Gartner, Data Monetization is one of the top ten trends in manufacturing, so CIO’s need to be aware of it.  Research firm Forrester also has multiple reports on this topic.  A quick Google search of the term yields over 200,000 hits in ½ a second. It is no wonder why so many manufacturing CIOs are now trying to better understand if data monetization can drive growth.

For decades, “making IT relevant to the business” has been a key CIO objective. Will data monetization finally provide an opportunity for manufacturing CIOs to achieve this vision? Or is this topic just more hype that will soon fade away?

Better Access to Intelligence Increases Profits

Manufacturers have long struggled with quickly and easily extracting intelligent business metrics from operations. This challenge has been a big driver in justifying the investment in Industry 4.0 programs. As more and more manufacturers move through their digital transformation, the necessary visibility to production data is now happening. And, with this access, the door is opening to see a new level of intelligence. This is a good thing.

Thanks to the growth in IIoT devices and software systems to collect and aggregate manufacturing intelligence, manufacturers now have a wealth of data to mine and turn into direct and indirect revenue streams. This is a core concept behind how data monetization can drive business growth, which can be best illustrated by examples of Data Monetization use cases.

1. After-Delivery Service Offerings

The most obvious mechanism to extract value from data collected during the manufacturing process is to use detailed product and production information as the basis for an after-delivery service offering.  With better knowledge of a product manufacturing genealogy, a manufacturer can better offer extended warranties, prepaid service contracts, or impending issue alerting services all of which are incremental revenue streams.  

Learn more here, Why Traceability is Essential to Offering Enhanced Field Service and MRO.

2. Detailed Service Documentation

Another potential revenue opportunity is to offer detailed service documentation and manuals, produced with actual assembly data incorporated on a serialized basis. Such a service manual could not only advise that when relacing a bolt that it should be torqued to 65 inch-lbs +/- 1 in-lb, but also note that the original toque value during assembly was 64.7 in-lbs. The value of providing this type of service extends well beyond an immediate gratification of seeing and documenting the work that has been completed, but to start building a digital history of work completed, which can be a valuable source of future process improvement – both from the manufacturer’s and end user’s perspective. 

3. Equipment as a Service

Numerous examples now exist of how manufacturers are creating new revenue streams by selling the consumption of their product as a service over time instead of an outright sale. The opportunity here is substantial in that manufacturers can further segment their products by the value provided. Additional services could be included that previously were not practical to consider or execute upon. But, with a data intelligence infrastructure in place between buyers and sellers, it becomes possible to offer new premium services, such as different warranties, support programs, or even quality segments. 

Looking Beyond After Market Services

The increase in available information also provides ways to indirectly impact profitability through lowering costs or increasing market share. One example would be to include some of the above features in the base product as a competitive differentiator. When faced with the choice of a product with additional information, even in a controlled price environment such as a commodity market or where there is a fixed price delivery contract all suppliers must meet, the ability to offer more for the same price generally will tip the scales in your favor.  

Data monetization can also lower warranty costs. If you recall just a few impacted units instead of an entire product category, because of the information you have, then the cost of a recall can be substantially reduced. Even if you can’t use data monetization to increase market share, if you increase customer loyalty you will lower your cost of sales.

The Downside of Data Monetization

CIOs that see data monetization as the ultimate solution to proving IT business value, however, will likely be disappointed in the long run. Each of the benefits described above is only going to deliver value if it drives revenue, increases customer loyalty, or improves market share. The unknown variable is the competition. If a key competitor devises a way to deliver what you intend to charge for at no cost, at best, you will have to match them just to maintain market parity. This might result in losing the incremental revenue stream – but the consequence would be direr from losing market share overall.

Also, data monetization won’t drive growth overnight – as if it can be just switched on as needed. You need to make investments to collect, aggregate, and utilize the information.  Connectivity is an essential element. So too is the commitment to maintaining the infrastructure so the data remains current and accurate. This means that operations (OT) security will require an investment to ensure production systems are not subject to intrusion and upset.

Data privacy laws have evolved considerably over the past few years. In some geographies, such as the EU and California, personal data in production records might not be accessible or could require additional security to avoid violating privacy regulations. 

Yet despite these challenges, it is difficult to ignore data and the potential value that can be unlocked to grow your business. The market is continually moving forward. What is considered an advantage from data monetization today will eventually be considered the minimum you must do to remain competitive. 

Make sure your manufacturing operations are managed with a modern manufacturing execution system to ensure the necessary agility and responsiveness exists to modify how data is collected, stored, and processed. An MES that has the flexibility to capture, store and process an ever-increasing volume of data is quickly becoming a “must-have” for any data monetization strategy, which is rapidly now becoming an increasingly important element of any manufacturing strategy.