The document discusses how an industrial equipment company can transform its business model using IoT and Azure cloud services. It outlines opportunities to shift from a product-focused to a service-focused model by leveraging sensor data from devices to offer predictive maintenance, remote monitoring and analytics services. This would allow the company to generate recurring revenue streams from subscriptions rather than one-time hardware sales and improve customer retention. The document also provides examples of how other manufacturers have transformed their business models and customer relationships through digital technologies and IoT solutions.

1. #IoTinActionMS
Azure IoT and
Business
Transformation
Business Model
Discussion
Daniel Li
IoT Device Experience

2. Recent IPC business model evolutions
Sunix advantage
Azure IoT Edge computing and AI
Discussion

3. …Time for Profits, Not Headlines
Translating this to that?
ROI
P&L Impact
Opportunity
Costs
Path of least
resistance
Business
Case
Mapping your IoT value beyond the hype

5. Margin Pressure
New Entrants from Consumer PC and ODM
Commoditization in vertical hardware such as digital signage, generic healthcare
Reduced or diminished NRE in new product design
Evolving Solution Sale
Device sale relies more on vertical solutions than before
Tier 1 OEM – Siemens, Schneider, SAP enter small and medium IoT space
Decisioning on what solution and devices to build for profits
Big Data and Machine Learning
Cost to shift IPC to premium Edge gateway, Computer Vision
Learning curve in AI results in challenges to developers

6. Access to Tier 1 Solution OEMs
New production line assists sales portfolio of 70%+ from large OEMs
ChipsetX partnership
ChipsetX as technical back up and supplier
Diversified subsidiaries
Extending IPC business - Device monitoring and ChipsetX technology access
Tap into new economy - Taxi hailing and intelligent routing
Online operation – Digital signage, advertisement business operation

7. #IoTinActionMSConnectivity
Device Management
Remote Monitoring
Alerts
App Enablement
Business Process / Workflow
Advanced Analytics
Remote Maintenance
Predictive Maintenance
Data Visualisation
Artificial Intelligence
Sensors
IoT Projects: 3 levels
Generation 2
Business Workflow
Generation 1
Remote Monitoring
Generation 3
Advanced Analytics
BusinessValue

8. Margin Pressure
• Shuttle, ECS activities in industrial space as sign of consumerization
• Niche and high value hardware require capital investment in design and production line
Growth into Vertical
• Does not own value chain but relying on SI and domain expert in last mile
• Mark share gain in classic solution OEMs (Schneider, PTC, Siemens) to small and medium enterprise
• Cloud – AWS, Azure and Google – expands hardware and solution foot print
High value hardware sale
• Computer vision, ADAS; Edge Computing with Machine Learning inference
• What to show and proof in sales kit, trade show and sales pitch
• Fast commercialization of data science

9. #IoTinActionMS
Supercharge your P&L
Revenue
Traditional Device Revenue 400 412 424 437 507
Expanded Offering, Devices 0 0 8 13 5
Reduced Churn 0 0 2 2 3
IoT Application/Services Revenue 0 0 0 8 89
Total Revenue 400 412 435 461 604
COGS
Device, Materials Costs 160 165 174 181 206
Device, Labor 92 95 100 104 118
Device Maintenance & Repair 16 10 7 7 8
Development Amortization 0 1 2 5 6
IoT Hardware Costs 4 4 5 5
IoT Related Labor 2 2 2 3
Cloud Hosting and Platform Costs 4 4 5 14
FieldOne Costs 0 0 0 0
Total COGS 268 281 294 309 360
Gross Profit 132 131 141 152 243
Gross Margin 33% 32% 32% 33% 40%
SG&A
Research and Development 72 78 83 88 109
Sales and Marketing 12 12 13 14 18
General and Administrative 16 17 17 18 24
Azure Hosting, Internal Use 0 1 1 1 2
Total SG&A 100 108 114 121 152
Operating Profit 32 23 27 31 91
Operating Margin 8.0% 5.5% 6.2% 6.7% 15%
Predictive Maintenance & Inventory SaaS
Expanded offerings, reduced churn
Reduced maintenance/repair savings
Device sensors
Field tech hours on deployment and integration
Field One
Cloud infrastructure
Wages and tools to manage solution output
(Power BI, new field mobile devices, internal use Cloud hosting)
R&D IoT Eng/Dev, pre technical feasibility
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
400 412 424 437 507
0 0 8 13 14
0 0 2 2 3
0 0 0 8 91
400 412 435 461 614
-160 -165 -174 -181 -209
-92 -95 -100 -104 -120
-16 -10 -7 -7 -8
0 0 0 -5 -6
-4 -4 -5 -5
-2 -2 -2 -4
-4 -4 -5 -14
0 0 0 0
-268 -280 -291 -309 -366
132 132 144 152 247
33% 32% 33% 33% 40%
-72 -76 -80 -83 -110
-12 -12 -12 -13 -17
-16 -16 -17 -18 -25
-1 -1 -1 -1 -2
-101 -105 -111 -115 -154
31 27 32 37 94
7.8% 6.5% 7.5% 7.9% 15%
+5yrs
App Dev Amortization for SaaS

10. Example:
Sandvik Coromant Field Service

11. #IoTinActionMS
Forefront of metal
cutting industry
Instant
recommendations
about cutting
parameters
Savings for customers
of millions of dollars
Predict –
When to change a tool;
When to order a tool
From customer to
sales interaction
Sensor-equipped tools:
Temp, load, vibration
Minimising idle
time up to 50%
Specific
knowledge at
tooling level
Facts out of
the machining
process
Integration to CRM
& Call Centre
Reinvent the art
of manufacturing
(machines, tools, processes)
Efficiency of
machining process
Collect data in
real-time
Unprecedented
field service

12. #IoTinActionMS
Digital Transformation
Business
Insights
Manufacturing
Efficiencies
New Business
Models
Features and
Rev Streams
1. Business units have
access to advanced,
real-time analytics for
install-base.
2. Understand how
products are being
used.
1. Manufacturing unit fed
real-time data on
defects & durability
2. Update manufacturing
process - avoid recalls
and warranty costs.
3. Experiment with BOM
savings informed by
live field data
1. Predictive maintenance
capability enables
referral model with
repair companies
2. Enablement of white
goods as a service (e.g.
lease or pay per use) -
increased refresh rate
for manufacturer
1. Hotel chain receives
device connectivity and
usage data
2. Consumer auto-orders
consumables after 35
cycles/loads
3. Consumer buys cost
saving updates based
on usage.
OEM OEM CustomerChannel

13. #IoTinActionMS
Transformation in your market offering
From “MRI Scanner” to “Remote diagnostics subscription”
From “Industrial Machine” to “Machine uptime subscription”
From “Thermometer” to “Temperature Control Service”
Transformation in your profitability
From hardware margin to subscription margin
From capex to capex+opex
Transformation in your customer relationships
From transaction relationship to annuity relationship
From procurement relationship to business owner relationship

14. Approach 1: Value Proposition first… work outwards
We use this approach when
• the proposition is defined
• we need to work out the impact on customers, activities…
• we need to determine our costs… how they scale
• …and how we’ll ensure revenue scales to at least cover costs

15. Approach 2: Work from outside in to Value Proposition
We use this approach when
• Existing business looking at new business opportunities
• Brainstorming ideas
• Value proposition is not clear
• Start from what we know

16. High Level Deliverable for BWM workshop

17. #IoTinActionMS
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