Bosch Software Innovations Iot Whitepaper Strategy
Bosch Software Innovations Iot Whitepaper Strategy
Bosch Software Innovations Iot Whitepaper Strategy
Software Innovations
February 2014
The IoT is the next generation of the internet. It is a global system of IP-connected
computer networks, sensors, actuators, machines, and devices. Merging this
physical world with the virtual world of the internet and software enables
companies and consumers to create and enjoy new services that are founded on web-
based business models. This will have a big impact on the way we do business.
Competition / sales channels: Imagine an arena full of new competitors, all jostling for
position and attempting to shape the future, and of course, trying to win over the same
A new breed of competitors
meet in a revamped sales customers. Well established producers in traditional industrial fields whether they make
arena coffee machines, cars, air conditioners or home fitness equipment, or run big vehicle fleets
or even electric utilities are suddenly not only competing with companies like themselves
but are also confronted with players the likes of which they have never seen before.
This is easy to visualize when looking at a simplified manufacturers traditional value chain
IoT: the end of linear value
(see Dave Grays sketch below on todays line of production): The manufacturer relationship
chains
might terminate at the warehouse or, at the very latest, at the point of sale.
Customer interaction: The points where customers and companies come together change.
Interacting with users over a
Instead of meeting at the point of sales, it becomes a continuous interaction as long as the
products lifetime
customer uses a product or services. When a product becomes an agent interacting with
humans and providing multiple services over a lifetime, it provides a new perspective on
business.
Exploratory management: Top-level and middle management have to adjust to the idea of
Accept risk of failing taking an exploratory approach toward advancing their IoT business ventures. They must be
engaged in shaping the future. However, the connected world is a highly volatile and
dynamic one which can also bring setbacks.
Ive worked for Fortune 500s that view the IoT as either a threat or a complete mystery.
"My belief is that business models will be discovered and, more importantly, the value of
the IoT will be determined by companies that start playing an active role and participate
in the value chain of first connecting everything to the internet, and then realizing the
unlocked value.
Many discussions around the topics of M2M and the IoT focus on how large the future
market is for both. This white paper tries to give an answer to this question in a later
Most important question for
chapter, too. After all, we think it is not so much a question of whether the market in 2022
decision-makers: How does
the evolution from M2M to IoT will include over 10 billion or 100 billion connected devices or whether revenue is over or
affect my organization below a certain amount. We believe the development from M2M to IoT is already
happening, so the most important questions for every decision-maker are: How does this
affect my organization? Does the IoT offer new opportunities for my organization to save
money or to make money?
The development from M2M to IoT will proceed primarily within three layers hardware,
connectivity, and applications. M2M hardware is often very specialized, expensive, and
offers low processing power. IoT hardware has to become cheaper with increased
processing capabilities and intelligence. The availability of edge nodes and edge controllers
Hardware, connectivity and
applications are the three suitable for specific use cases and deployable in different environments is a cornerstone for
layers primarily affected by the development from M2M to IoT. Affordable and reliable connectivity with sufficient
the evolution from M2M to IoT coverage also counts. We expect solutions to take advantage of mobile ubiquity and
increased network quality and speed. Finally, the development of innovative applications
and the availability of appropriate application platforms is a critical factor for the recast of
M2M to IoT. Traditional M2M applications have been customized and provided minimal data
analytics capabilities. One of the primary measurements of a successful IoT application will
be its ability to extract useful information from a mountain of data collected from many
different sources, so that organizations, users, and devices are able to act faster. In an IoT
While the uses for the IoT seem to be limitless, getting the ecosystem to work harmoniously
will be challenging. For integrated IoT solutions to succeed, platforms have to connect
applications and devices via any network. Additionally, platforms have to connect new and
existing but disparate systems in one location.
The right amount of creativity and the courage to think unconventionally and not just focus
on the next quarter will be the most important success factor.
For example, automakers and car rental companies have introduced new car sharing
business models enabling customers to locate cars using their smartphones, rent them for a
short time, and then park and return them anywhere within a defined zone (e.g. DriveNow
and Car2Go in Europe and ZipCar in the US). Another example is electromobility, where
companies, energy suppliers, public utility firms, the public sector, charge spot and parking
lot operators, retailers, and the drivers of electric vehicles are all cooperating closely.
A variety of connected things are increasingly IP-enabled and equipped with different
sensors or actuators to gather information from the asset or control their behavior.
A connected thing might Connected things can be things such as a car, a security camera, a production machine or
consist of a multitude of a household appliance. However, when talking about connected things, do not forget that
connected things
one connected car can consist of a multitude of connected things such as sensors,
actuators or control units.
In the area of connected things, one key driver is the ubiquity of mobile communication
networks, including carrier networks like GSM, Edge and UMTS, as well as the abundance
of available short-range communication technologies like WiFi, ZigBee, Z-Wave, Bluetooth,
NFC, and RFID.
Hardware and connectivity
are readily available and
cheap Another key driver is the continuous reduction of hardware costs and the accompanying
enormous increase in hardware performance for small devices. Instead of having to use
cumbersome, low-level embedded system technologies, more productive environments are
available, including software stacks like embedded Linux and embedded Java. And finally,
an increasing amount of all kinds of sensors and actuators are available at ever-decreasing
cost.
Next to connected things, the users of those things are playing an important role in a
connected world. For example, they use the car sharing service, the smart pill dispenser or
New web-based, value-added
services open up new the Square credit card service. Users of networked things have a special role: in many
dimensions for both users and cases, it is no longer the industrially manufactured product that is the focus, but rather the
enterprises
web-based service that the user accesses through the device over the lifetime of the
product.
Enterprises are typically responsible for providing services and processes related to the
connected things and to users. For example, a car sharing company needs to provide
As connected things become
players in business customer-oriented services like car reservation, billing, etc. In addition, the car sharing
processes, enterprises need company has internal processes, such as car maintenance and repair. In the enterprise
a management system for
area, we need to be able to efficiently manage processes related to connected things.
their process tools and
techniques Established approaches such as Business Process Management (BPM) and Business Rules
Management (BRM) provide valuable tools and techniques in this area.
Partners play an increasingly important role in a connected world, from integrated supply
chains to lively ecosystems created by platform operators such as Salesforce or by mobile
app stores. In diverse sectors of the global economy, new web-based business models are
bringing together market players who previously did not do business with each other. For
example, a car sharing company might outsource the car repair process to an external
partner.
The connected things in this solution are represented by the vehicles in the fleet. Leveraging
an on-board, built-in unit and remotely connecting this unit with a backend application allows
the fleet operator to get real-time information about fleet performance, individual vehicle
status, and so on. In the enterprise backend, this information is consolidated and fed into the
relevant backend processes. Web-based access to vehicle information can be provided to
the individual car lessees. Other mobility providers, such as gas station operators, are also
integrated into the enterprise processes.
Manufacturers and industrial enterprises of various kinds are facing similar challenges. They
are selling products on highly competitive markets. Almost all companies feel the pressure
to increase their results, and reducing costs is always one possible way to achieve better
net operating results. New options to reduce operational costs are limited. Most plants and
production processes are already optimized. Connecting and integrating things might offer
new options. One option for more efficiency is predictive maintenance.
Based on this evaluation, we assume that the highest amount of IoT connected devices will
be concentrated in four industries in 2022 intelligent buildings, automotive, healthcare,
Four focus industries of IoT and utilities.
connected devices: Intelligent
buildings, automotive,
But its not just the number of connected devices in specific industries that should matter.
healthcare and utilities
Its even more interesting to consider which applications will have the greatest importance.
A more detailed look at the utility industry reveals that more than 90 percent of all connected
devices will be related to smart metering applications. Electric vehicle charging and
transport & distribution will be of only minor importance with regard to the number of
connected devices. But even application areas with comparably low numbers of connected
devices might provide huge opportunities for developing new solutions and enjoying greater
success in the marketplace. In smaller application areas, the number of competitors and
competitive pressure will likely be lower, and the effect that efficiency or revenue have on
new solutions is not necessarily linked to the number of connected devices.
The automotive industry provides a similar picture. 90 percent of all connected devices will
be used for vehicle platform applications. Other applications emergency call,
entertainment, navigation and security & tracking will prove important for the development
of new business models and increased efficiency in this industry. The IoT evolution in the
automotive industry has already started when you consider connected fleets, car-to-go
solutions, and on-board entertainment offerings.
The sector manufacturing and supply chain will require a relatively low number of connected
devices compared to other industries. But the potential effect of device management and
IoT solutions in this sector is comparably high. For example, predictive maintenance
applications have shown high potential for reducing costs or increasing uptime and
productivity. An evaluation of this sector shows that all application areas are equally
important. It will be dominated by applications in the field of processing, transmission and
distribution, warehousing, and predictive maintenance.
The IoT maturity model illustrates the different levels a solution can reach
on the IoT value curve. Enterprises are not adopting IoT solutions and new
business models overnight. Many of our customers and partners are
actually embracing the opportunities of a connected world in a stepwise
approach.
At the start, there are isolated things connected with the internet. The gathered data is
processed only for a very isolated purpose (e.g. monitoring a pipeline). That means that
early IoT applications often follow a stovepipe approach and the value of data collected from
connected things is mostly locked.
In a first step of adoption, these assets are connected to the internet, but only to isolated
backend systems. This enables remote access to the assets, albeit often with limited data
available, and a more reactive approach to act on this data. On this level, only fragmented
device information is available and thus only a reactive event reaction is possible.
The highest level of maturity in this model is called differentiated. Because of integration
and optimization, new revenue-generating capabilities are possible, based on cloud-
delivered customer applications and the capabilities to manage and control complete
products remotely and in a differentiated way. In this way, each product or service can be
customized and managed on behalf of differentiated user demands. Differentiated audits
and reports are easy to perform and visibility reaches a new level. Clouds are not only
integrated into another, but various clouds are meshed and the barriers between
ecosystems are torn down. This level of maturity has not yet been fully accomplished by
most organizations today. Even advanced business models have achieved no more than
optimized connectivity and are only now beginning to develop into differentiated models.
To expand and intensify the relationships with existing customers is one of the main
objectives for most companies. Value-added services and new business models are
Value-added services important methods for achieving this objective and are bringing fundamental new
intensify customer opportunities for enterprises. IoT technologies create new ways for companies to enrich
relationships and bring
their services, gain customer insights, increase efficiency, and create differentiation
additional customer insights
opportunities. Business models based on connecting things bring companies closer to their
customers and deliver real ROI.
However, the majority of successful business models in the IoT will not follow the pattern:
A vendor sells a physical item to a customer. Also, conventional Web 2.0 business models
Focus on two basic business advertising being the most outstanding dont have the potential to scale or work for the
model traits for the IoT:
IoT. The IoT connects non-physical items such as data and services to physical things. This
evolutionary and disruptive
is why more sophisticated (evolutionary) and maybe even completely new (disruptive)
business models will play a major role.
Entrepreneurialism
The connected world is a highly volatile and dynamic one, and the task for entrepreneurs is
to actively shape this world and make the most of the opportunities it presents. This
Explorative entrepreneurs
needed includes being ready to deal with high-speed change. From what we have seen, IoT
entrepreneurs also need to follow exploratory approaches as they face limited predictability
and want to minimize risks.
Joint innovations
With the IoT, the economic order and the competitive landscape will increasingly be subject
Cooperation between
to change. Digital networking offers undreamed-of technological possibilities. Companies of
companies of all sizes from
industry, trade, and service all sizes and from all industries need to work together to seize the opportunities and
sectors possibilities presented by networking over the internet. It is about working together in both
interdisciplinary and cross-sector ways. Collaborations between companies with
complementary know-how are a major driver of this connectivity trend. Executives need to
learn and adapt quickly within their ecosystem(s).
These patterns serve as building blocks for new business models. They provide external
inspiration in the process of creating new ideas for a companys business. Combining or
transferring them to new industries creates new solutions.
Example from the Bosch Group: For Bosch, one viable way to enter new and
generally highly dynamic markets is with units that are small, agile, and
independent. Currently, Bosch has four innovation clusters for Connected Mobility,
Connected Energy, Connected Building, and Connected Things. The clusters take on the
role of incubators, which then test out business ideas beyond the normal constraints of
established businesses. The Connected Things innovation cluster recently became Bosch
Connected Devices and Solutions GmbH.
Device management
Service solutions that remotely detect, identify, and resolve various kinds of issues are the
catalyst for a superior service level. Improved uptime, reduced onsite visits, and shorter
Needed: A connected device
strategy based on service calls can be achieved through proactive service processes. This is made possible
systematically collecting and through a connected device strategy based on collecting and analyzing device data in a
analyzing device data
systematic and targeted way. The data, collected from devices and systematically analyzed
by specialized backend systems, build the bridge to proactive service processes and value-
added services.
Quality improvements
By analyzing data across multiple systems, organizations can reduce costs and downtime
Data insights allow for more or increase the quality of products and services. Analyzing trends over whole systems
intelligence and optimization allows quality issues or design faults to be identified. Manufacturing or service processes
can be optimized and faults in third-party supplied parts can be recognized faster. Data
analytics helps us to understand the relationships between problems and specific parts.
Problematic production outputs can be identified early and unhappy customers or even
expensive recall processes can be avoided.
Product design
Data gained from user behavior allows the identification of usage patterns. This enables
User behavior data spice up
product managers to design products and features that not only fulfill customer demands in
product design and
management a much better way but also increase market share by offering a superior product design that
takes real-time customer information into consideration.
Predictive maintenance
Analyzing data history helps us to predict necessary maintenance cycles for devices and
machines and their components. The analysis of sensor data uncovers archetypes and
Predictions based on data
failure indicators. That way, failures and incidents can be identified even before they occur.
history facilitate focused
maintenance Maintenance cycles need not be scheduled on a time frame basis and unnecessary
maintenance assignments can be avoided. Exactly tracking a devices usage and wear
means maintenance and replacement of parts need only be done if truly necessary. As a
result, the work force can be allocated more efficiently and the costs of parts to be replaced
can be reduced to a minimum.
Data collected from connected things in combination with other enterprise systems are the
key to a new level of transparency and efficiency across enterprises and their partner
Data in combination with ecosystems. For example, real-time usage data can be integrated into a CRM system, or
enterprise systems provide data collected from a production unit can be forwarded to a supply chain management
more efficiency and
system. Error-prone manual steps can be reduced, supply chains can be optimized, and
transparency
new sales opportunities can be identified (e.g. replenishment for consumable goods, cross-
or up-sell opportunities or replacements for written-off assets). Based on real-world data,
usage patterns or issues and incidents can be identified, opening up new possibilities for
quality assurance, product lifecycle management, and enhanced product features and
services.
By monitoring expandable parts in production plants, maintenance units can exchange parts
proactively to avoid downtime. Sales and marketing units can monitor sales, usage, and
consumption over a long period of time and can offer the right service at the right time.
Observing critical data points in a device allows proactive recognition of failures and
notification of service teams to avoid outages for customers.
To identify and develop the business model that suits your organization,
customers, partners or competitive environment might be a challenge.
Many parameters and variables have to be taken into consideration. This
chapter aims to give you some initial ideas about how to start identifying
the risks and opportunities related to the IoT. For business models in
general, we see two fundamental characteristics: business models can be
either disruptive or evolutionary.
The fundamental difference is that evolutionary business models will help you primarily to
save costs in a first step, speeding up your time-to-market and improving quality. This will
increase competitiveness, revenue, and market share. But it is also a fundamental starting
Evolving an existing business point for manufacturers new to the IoT. This is the right stage to challenge the existing
model can be the first entry
business model: what about adding connectivity to products? Which services are possible?
point into the IoT
Where do we see potential use cases? However, there are limitations. From our
conversations, we observe that many companies look at the potential of the IoT only
through the glasses of their existing business model. A very common mistake is waiting to
make fundamental decisions, such as waiting until a market is big enough to enter
(according to the existing business models definition). This can lead to an unrecoverable
disadvantage.
To help you get started on your either evolutionary or disruptive IoT business model, we
Use the IoT business model abstracted nine typical IoT use cases.
matrix as a strategic tool for
your individual assessment
Based on the 55 successful patterns identified by The St. Gallen Business Model
Navigator, we added this information to each broader category. Note that not all
mentioned patterns per category will fit with every use case of the particular category.
Each pattern has four central dimensions, as outlined in the Magic Triangle below:
the Who, the What, the How, and the Revenue. This will help you to sharpen your
particular starting position.
Play around with your use case, the patterns, and their dimensions to customize your
individual IoT business model.
With some 600 associates worldwide, Bosch Software Innovations has locations in Germany
(Berlin, Immenstaad, and Stuttgart), Singapore, China (Shanghai), Australia (Melbourne), and the
United States (Chicago and Palo Alto).
The Bosch Group is a leading global supplier of technology and services. According to
preliminary figures, its roughly 281,000 associates generated sales of 46.4 billion euros in 2013
(Note: due to a change in the legal rules governing consolidation, the 2013 figures can only be
compared to a limited extent with the 2012 figures). Its operations are divided into four business
sectors: Automotive Technology, Industrial Technology, Consumer Goods, and Energy and
Building Technology. The Bosch Group comprises Robert Bosch GmbH and its more than 360
subsidiaries and regional companies in some 50 countries. If its sales and service partners are
included, then Bosch is represented in roughly 150 countries. This worldwide development,
manufacturing, and sales network is the foundation for further growth. In 2013, Bosch applied for
some 5,000 patents worldwide. The Bosch Groups products and services are designed to
fascinate, and to improve the quality of life by providing solutions which are both innovative and
beneficial. In this way, the company offers technology worldwide that is Invented for life.