“Too many companies I’ve seen initially get into this thinking they’re gonna have some 12, 18-month ROI… they’re gonna put a bunch of data in and all of a sudden they’re going to have some super whiz-bang thing happening. And it’s definitely not that. It’s a long-term journey.”
In this episode, we talk with John Clevenger, Managing Director of Accession Consulting. John shares the many opportunities the Internet of Things (IoT) brings to the manufacturing industry. He offers practical tips for getting started and outlines what NOT to do or expect when implementing an IoT strategy.
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Announcer: Hi and welcome to Data in Depth, a podcast where we delve into advanced analytics, business intelligence, and machine learning. And how they’re revolutionizing the manufacturing sector. Each episode we share new ideas and best practices to help you put your real business data to work. From the shop floor to the back office, from optimizing supply chains to customer experience, the factory of the future runs on data.
Andrew Rieser: Welcome and thanks for joining us for another episode of Data in Depth, the podcast exploring the world of big data and its role in the manufacturing industry. I’m your host, Andrew Riser. Today we are joined by John Clevenger, Managing Director of Ascension Consulting. Today John will cover a bit about the Internet of Things, commercialization, and value creation looking at the topic from the business side. Welcome, John.
John Clevenger: Thanks Andrew, it’s a pleasure to be here today.
Andrew: Absolutely, so before we dive in, it would be great to have you give a little bit of background about yourself and just describe your journey in your own words. Kind of what led you ultimately in your manufacturing career leading up until your consulting career today?
John: Certainly. Well, I started my career with Cummins Filtration, which is a $1.2 billion business unit of Cummins Inc. You might know it as Cummins Engine or Engine Company in sales and marketing. During that time I became heavily involved with Six Sigma using data to improve product offerings and grow and tying that to the use of technology to do things better and faster. And it was during this time at Cummins that I honed my skills related to growth, sales, and profits, and becoming excellent at commercializing products and services. So for the last 25 years, I’ve leveraged this base in multiple industries, and whether I am in general management or in an executive leadership position, using that to the advantage for growth. So most recently I led a major global project for global IoT manufacturing in IoT, and particular commercialization and value creation of an IoT offering. And probably about a year ago, I made the decision to move out of the corporate career and take my expertise to businesses, mostly manufacturers, and focus on helping them with growth.
Andrew: IoT and Industry 4.0 are definitely hot buzz words and topics in this space right now, so I’m looking forward to diving a little bit deeper into it. So, before we get into the weeds there, how about you tell me a little bit more about session consulting, your practice, and what you’re focused on?
John: Certainly. Well, at Ascension Consulting I’m focused on growth and growth for my clients. That’s what everybody needs. I wanna tie that to a cohesive strategy that’s tactically implemented through the organization. That needs to be done in a cost-effective, and practical, and meaningful way. I leverage my practical business experience to make sure that it is done in a practical, meaningful way. And while there’s a number of areas where that can happen such as product launch and development, sales strategies, et cetera, of which I’ve done a number of consulting projects for, the newer and key area is IoT and it leverages a lot of the same background and fundamentals. However, it’s gotta be done in a proper way with value creation in order to assure that growth is a result as opposed to just a project that dies in the vial.
Andrew: Yeah, I think we’re definitely gonna dive a little bit deeper into that as we progress through the podcast. So maybe let’s just start with some terminology. So, I know that buzz words kind of encapsulate this industry and this space, but maybe tell me how you define Industry 4.0 and the Internet of Things. And when you’re talking about that with your customers and prospects how do you define it to them and how do you identify and share with them what they should be thinking about?
John: Absolutely, one of the first things I think it’s really important when you’re defining Industry 4.0 or IoT, whichever one is used to hearing about it as I think it’s really simple to try to break it up into what it is and what it is not. So, if we first start with what it is, it is a new business model, a completely new business model. It’s a way to deliver greater value to your customers while becoming closer to your customers. It is an advanced services business model. In other words, it’s not just about data. It’s about offering and improving services, advanced services, to your customers to help them run their business better. Because of that, it’s very people-intensive. It involves a lot of background people, field service personnel, other things that some manufacturers may not have been heavily involved in, depending upon their business model currently. And it is a long term journey and not a short term destination. And really, too many companies I’ve seen initially get into this thinking they’re gonna have some 12, 18 month ROI, they’re gonna put a bunch of data in and all of a sudden they’re gonna have some super whiz-bang thing happening. And it’s definitely not that. So, it is a long term journey.
Andrew: Yeah, that makes sense. I think everything that you just described pretty much encapsulates what I define, or think of, as digital transformation. I think digital transformation is very synonymous with Industry 4.0 and IoT and everything that you just described. I also somewhat think it’s comical how, just alluding to your background where you have a lot of LEAN, Six Sigma experience. So, I think traditionally manufacturers have done a fantastic job on the shop floor, and with the product, and eliminating waste, and continuous improvement. What I find comical is that they sometimes struggle to expand that beyond the shop floor to other areas of the business. And it seems like maybe I’m oversimplifying it, but it’s basically taking that LEAN mentality and that continuous improvement mentality and sharing it elsewhere within the business.
John: Yeah, well I would agree with you. I mean, there’s a handful of companies that really do a great job of transferring that to the business side, whether it’s an administrative process or product launch. A handful has embraced design for Six Sigma, which drives that on the product introduction side or process development side. But, it’s very few companies that actually do that. So, which actually leads you into the contrast of what it is not. And by the way, related to what you’re talking about, LEAN transformation and whether it’s IT transformation, it is a heavy business side thing and I think one of the failures people frequently have is focusing or thinking of it as only an IT project, which it’s not only an IT project. It certainly has components of that, it’s not only about hardware or software centers and controllers which are mostly off-the-shelf available things today, and so it’s not overly complicated IT technology at all. It’s just pulling it all together that can be a little bit more complicated, obviously not to minimize the IT side of this. And it’s not, as I mentioned before, it’s not a 12 to 18-month revenue strategy. It is a long term plan, it is not a short term plan. And companies have to be committed to long term, not looking at this as some short term win.
Andrew: Yeah, no, I agree. So, let’s dive into the weeds here a little bit. In nearly all consulting efforts or projects in general, I think the framework generally falls into one of these three categories. It’s usually around defining your strategy, getting executive buy-in, leadership from top-down and bottom-up and really honing in on, what’s the strategy. The second bucket we typically come across is, okay now that we have the strategy, how are we gonna measure that? What defines success? What’s gonna be the business value? And then the last piece is just execution of that and then making sure that you can scale beyond the pilot or initial phase. So, if we can, let’s talk through each one of those. And I’d love to get your insights on how you approach that with customers. So, if we touch on strategy first, how do you approach that conversation? So it’s a new manufacturer engagement you’re coming into, what’s your thought process and mentality about extracting out that strategy or helping them define the strategy?
John: Right, well one of the most important things we do is we try to start with is to ensure that I’ve got a whole management team involvement. I really like to have a management brainstorming session with as much of the leadership team as possible, all functions involved. And usually we start with the question of, what problem or problems are we solving, or can we be solving for our customers when we have access to real-time data? And we’ll put some things up on a board, we’ll use Post-it Notes and try to categorize things into areas and find out commonly what they think we think the top three to five things are. So once you can list three to five of these things, then you’ve got some serious work you have to do now, which needs to be done surrounding what that actually means to your customer. And in that process actually is gonna involve, first building your own internal hypothesis related to customer value. So, assuming those three to five things are right, I have to tease them out internally with people who are really close to the customers. So I like to typically get either involved with sales or operational personnel that are dealing day to day with the customer and find out okay on these three to five things, what do they think the actual creation is. And then, you have to go validate those hypotheses with some actual key customers. Usually, I recommend you get three to five that you have your best relationship with and you get some validation with those key customers, and at multiple levels of your customer of what you have as a hypothesis they agree with because you might find they have a different perspective than what you thought.
Andrew: Yeah, which typically is often the case, right?
Andrew: I think most internal discussions, I think companies are naive and typically the problems that they point to are self-serving because it causes them pain internally, whereas the customer doesn’t care. So, I think that’s a great approach for getting that voice of the customer really validating the hypothesis that gets created. Just generally thinking about the customer is also refreshing to hear. These projects transcend beyond the four walls of the organization and a lot of this business value needs to be that customer-driven or things that are gonna move the needle to make doing business with you easier. So, John, now that we’ve kind of worked through that strategy session and brainstorming, and identified where those impacts can be measured, how do we do that? How do you define success and how do you kind of put in place the business value and measuring that?
John: Well you know, it’s really vital that you get clear on where the value’s created. Then you gotta think through how you’re gonna price for that, and then how are you gonna test, and then ensure that your customer receives a value you think they should be receiving. And it’s gonna take, unfortunately, far longer than you want and it’s gonna be far more important though, than anything else you’re gonna do. And really, that drives the difference between no ROI or a fantastic ROI tied to all that work. And what I’m really getting at there, is value creation should be creating true customer improvement metrics the way they look at their business. If you’re a manufacturer and you’re tied into their production process, for example, there should be key production metrics that they have on their side that have some internal improvement value, whether it’s plant production or process improvement. Things that they actually have on their internal dashboards that are really valuable to them. And if we’re impacting those as a manufacturer in a positive way, and we can measure for those objectively, then we created real, true, measurable value for the customer that should allow us to price and build some pricing models surrounding that. But I know there are lots of different ways to skin that cat. But those things end up driving a real return on investment that’s really measurable.
Andrew: Yeah, that’s great. So, I think the last piece that we wanna expand a little bit more on is the actual execution. So, we can talk with the leaders, develop the strategy, really understand the voice of the customer. And now it’s getting this from paper to reality, right? So executing the project, there are statistics all over the place about failed, whether it be digital transformation efforts or IoT projects, the headline is usually the inability to get out of pilot mode. So I think that’s probably a can of worms that we can somewhat open up, but I’d love to get your thoughts on how you actually now take this into something that becomes not only just a pilot but something that can scale.
John: Right. Well, the first thing, I think, and I agree with you that, everybody’s got to recognize is that scaling’s not an easy thing. It is difficult, frustration’s expected. And as a matter of fact, setbacks will happen. And everybody has to be prepared for that. This is one of the reasons why it’s so important the whole leadership team is onboard and maybe depending upon the company, including the board is on board, in terms of this being an actual strategic direction, and again, not a short term thing. Because what I have seen happen is, a lot of the failures happen because they get in to trying to scale and there’s difficulties or setbacks that happen, failures that happen in the process and unexpected thing happens, and ROI they thought would be there isn’t there the timeline they expect, they just don’t throw the right amount of resources at it, under-budgeted either people or dollars or whatever, again, because not everyone was on board, they tried to do it with a skunkworks, or something like that. So, it’s really, really vital that the whole leadership of the organization is on board as a strategic direction and the right resources are truly focused on it. And then they don’t give up just because there’s a setback because there is going to be a setback. That is a fact. So, anytime I’m talking with my clients, the first thing I always tell them is, “Expect a setback, and if you’re not ready “or can’t handle a setback “then you’re not ready to even start down this path.” Secondly, it’s vital to really have a solid infrastructure plan because a full launch to scale means that you’ve gotta have a solid people and response plan to grow. So, again, HR is so key here in figuring out which one of your current key resources are gonna move into this new area of the business or what resources you need to recruit for and at what timeline, and that you actually may have to make an upfront investment on people, which is a scary risk for a business, to make that kind of an investment prior to solid revenue. Most companies can see doing that on something like IT or something like a building or a piece of equipment, but they have a hard time doing it with people. It has to be approached the same way. So I’ve found that the best way to scale quickly is to work hard to gain support with your best and key customers during the pilot phase. So if you pilot with your best and key customers and you do whatever it takes to get them on board first and early, and that could mean throwing some things at them or making it super cost-effective for them, maybe it’s a loss leader at the beginning with them, but if you support them really, really well and you get them on board, they’re gonna become your industry spokesman and they will help you with testimonial marketing and things in the industry move forward and gain further acceptance. And further, if you plan your infrastructure deployment around these key customers and you use their revenue to fund scaling, then you don’t have to end up spending a lot of additional money. You’re able to spend and use customer funding to scale your resources around deploying your advanced services model and the other aspects of your IoT business model to the field and use that to fund it. But again, it’s got to be viewed through the lens of long term investment. You can’t expect too much too soon and you can’t oversell this to the board and the marketplace as a short term, and we’re gonna have massive returns in the next two years or something like that because that’s gonna set yourself up for failure in multiple areas.
Andrew: Everything that you’re saying is spot on and expectation management internally and with the right customers is key. Back to your point earlier, these aren’t small investments and aren’t small duration projects. It’s literally a change in mentality and a change in business strategy and how they’re gonna operate. And so, another key piece that you hit on that might be worth exploring just a little bit more is around the types of resources for this. So, are you seeing with customers that they are lacking the kind of skillsets needed to take the reins of these types of transformation or IT projects and that’s what they’re struggling with of trying to identify what that looks like? Maybe just shed some insights on what you’re seeing in this space because I’ve got mixed feelings about it. I’m just curious to see your perspective.
John: Certainly, if you break it up into functions, where typically the skillset is existing is IT. As I mentioned, most of the technology’s off the shelf and it’s pretty readily available. Either they have it internally or it’s not too difficult to get someone to help deliver the IT infrastructure side of this. Usually, the skillset issues that they run into are on the sales side. You look at most industrial manufacturers, they have salespeople that are great at selling a widget but not an idea. And this is much more of an idea or service sale and I’ve found that frankly, only about 10% of the existing sales force in most manufacturing companies are capable of making the shift. So that’s usually a big area that they have to figure out how they’re gonna deal with. And then, another issue when it comes down to this, is just an internal concept of how are they gonna deal with this new business model organizationally. Are they gonna do it as its own business unit by itself? Is it gonna be within an existing one? How are they gonna set up the P&L? How do they do the financial metrics and recognition? And do they need to assign and bring in different finance type of resources or different accounting? You get to the customer service side and the technical side of this, you need people who can actually diagnose technical issues through looking at software and dashboards and then deal with customer conversations in the middle. There are some different types of project management that start to look really like a hybrid between an IT project management type of project and manufacturing project management. They’re kinda somewhere in between because it’s a little bit of both. Oftentimes that’s not really a skill set that you have within most organizations. Many times you have to go find it and there’s not a lot of that actually in the marketplace. So you have to really find the right person who’s pretty adaptable and outgoing and then just in general, the types of people you wanna put in this area, really it’s maybe less about the experience and really more about how they think. Are they forward thinkers? Are they open to change? Are they generally upbeat, positive people who see an issue and they wanna overcome it? They don’t get scared by a problem approaching them or scared by ambiguity because when you’re moving in a completely new business direction there is a ton of ambiguity. You have to create it as you go, so you have to have really forward-looking people, that can deal with living in a space of ambiguity as opposed to a very defined space.
Andrew: Right, and that makes perfect sense. So, let’s kind of tie this all out with how you measure success. So we’ve got the strategy, we’ve got the key customers identified, we’re now in pilot mode, on the approach of scaling this IoT effort. So what do you look for and how do you set those expectations with both the customer and internally with the business to measure that success?
John: So, as I mentioned early, what we’re starting here with the customer and metrics really need to be defined early with your customer, and it needs to be defined related to the value creation that you’re attempting to deliver to the marketplace. I mean, the IoT puts the manufacturer inside of the customer’s business. And so, really your success needs to be tied to their success, therefore you need to have a thorough agreed-upon set of metrics that are really tied directly to how your customer views their success. And so, oftentimes these are not necessarily off the shelf because every customer, even in the same manufacturing space, may have totally different internal metrics on how they view success. They may have different manufacturing processes from the next guy. And so, the reason you wanna start with key customers too is that they may be letting you in on things that they view as company secrets. And they’re only gonna do that with somebody that they truly trust. And so if you’ve been a long term, key customer, trust is vital to getting these set up. So you can’t just go out and do this with a target customer. It’s gotta start with your top best customers because they’re gonna be the only one where you’ve got a long term relationship of trust established. And then while you should obviously have some internal metrics that help assure you’re getting an ROI, so it could be a financial ROI, it could be tied to revenue, field service utilization, first-time fix, or some other metrics. Metrics like those are fine and probably important, although you should keep them to three, four, something like that. A really small list. The key to the long term success is really gonna be clear customer success metrics. If your customer sees improvement in their metrics. And then they see real dollar value creation on their side, you’re gonna have no problem, as a manufacturer expanding your services out to other people and gaining industry support because they’re gonna talk about you to everybody they know. And they’re gonna be glad and happy to talk about it. Too many companies look at this through the eyes of internal operational improvement, as opposed to improved customer relationship development. And so really the more focus needs to be put on the customer improvement metrics. And as long as you do that, the better off you’re gonna do in the long run. So really the establishment of metrics really starts out early on and then gets refined as you go through the pilot phase with your customer because you’re gonna learn some things that you didn’t know or metrics you thought early on were gonna be pretty easy to get and find out that they aren’t. And you wanna replace it with a different one and the customer agrees, so there’s gotta be a regular process and refinement of metrics. And again, it really needs to be objective. You don’t want things that are not objective, I like to say, “Moogy foogy.” I know you don’t really know what they mean. I mean really, truly objective that it’s data that the customer can easily and quickly supply to you that’s objective or you can easily get out of your IoT data and in turn, interpret that into something of value for the customer.
Andrew: That’s great John. So I appreciate all the insights around that. One of the statements that you made that I’m just gonna restate because it really resonated with me was, “IoT puts the manufacturer inside the customer’s business.” I think that’s a great statement that is reflective of what we just walked through and talked about on this podcast. So, John, it’s been a real pleasure talking with you today, but before we close out I’d like to ask the question of where you see this going. Where do you see the future of IoT? Where do you see the future of manufacturing? What things should not only your prospective customers but just the industry in general, be prepared for?
John: Certainly, so it’s really vital to understand that IoT is not a short term trend of the day. It is here to stay and it’s only gonna pick up speed. In the future entrants into your market may not come from your traditional competition. This is a hard thing for a lot of manufacturers to understand. They may see new competition come inside from a completely unrelated, typically natural competitor for them that IoT if a company deploys it properly, they may be able to take hold over whole parts of a plant which could incorporate a manufacturer’s product as a component of that. And all of a sudden, their customer relationship closeness gets second or third delays. So it’s really, really vital that they get out in front of this sooner rather than later. At some point, IoT is gonna become table stakes to doing business and those who simply don’t have it are gonna end up being out of business and finding their customers quickly leaving them and going to people who do have an IoT Industry 4.0 presence and can help them improve their business. Further, the other thing to be thinking about is, once it gets to table stakes and basically everybody has it, then at that point differentiation’s gonna be related to who provides the best measurable benefits to the customers. So, the sooner you get started and start establishing customer-based metrics that provide customer-based ROI and value, the more likely you’re gonna be prepared for the future competitive landscape and be a market leader in that space, possibly leap competitors and also fend off competitive things that you didn’t see coming from your flanks and outside of your typical industry.
Andrew: Fantastic. Well John, thanks so much for joining us today. Always love talking with other manufacturing leaders like you who are really driving change and on the front lines of technologies and trends like IoT.
John: Absolutely, thank you so much for having me today. I greatly appreciate it and all the best.
Andrew: So, for those of you listening, if you’d like to learn more about John and Ascension Consulting I encourage you to visit his LinkedIn profile and our website, which we’ll be sure to provide a link to in our show notes. If you enjoyed this episode, please take a moment to rate the episode and subscribe to Data in Depth, available on iTunes, Google, Spotify, Stitcher, and pretty much anywhere else you might consume your podcasts. Thank you again for joining us today.
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