How, Not What, Will We Use the Industrial Internet of Things?
Establishing mid- to long-term plans and addressing security issues are just as important as technology.

"We must establish a short-term, mid- to long-term roadmap, comprehensively considering not only technology but also organizational capabilities and corporate culture."

KPMG, which gave the keynote speech at IIoT Innovation Day 2018, presented six criteria for commercializing the Industrial Internet of Things (IIoT): technology, organization, employee capabilities, service network, finance, and security, and stated that a balance is necessary among these.

The industrial market and national policy are focused on technology. A prime example is the government's support policy, which provides funding to small and medium-sized enterprises (SMEs), which lack the financial and human resources capacity to transform the IIoT compared to large corporations. The national perspective also recognizes the IIoT as a factor that can enhance national competitiveness. However, Lee Soon-yeol, Managing Director at KPMG, stated, "It's questionable whether a government plan solely providing financial support will be effective." He added, "For the IIoT, support measures based on sustainability are likely to be one-time measures, and a mid- to long-term roadmap is needed."

First, we must comprehensively consider both technological and external factors to develop long-term forecasts and prepare for business innovation based on these forecasts. The domestic automobile industry market has recently been declining, with China catching up. Furthermore, with the shift to electric vehicles, the resilience of tier 1 and tier 2 suppliers working with large corporations will inevitably diminish. A shift in the attitude and perspective of both companies and governments toward the Fourth Industrial Revolution is essential. A long-term perspective and diagnosis are needed to understand how manufacturing can transform from a macro perspective and analyze the value and outcomes of investments. The fact that not only technology and manufacturing companies, but also consulting firms like KPMG and McKinsey are jumping into promising IIoT industries underscores the importance of establishing a roadmap.

Sim Jeong, Managing Director of KPMG Lee Soon-yeol

The adoption of IIoT brings with it technological and business process changes. Sudden changes, often called revolutions, can lead to conflicts and cultural differences within organizations, depending on circumstances and vested interests. For example, while employers may want to increase efficiency and reduce labor costs through automation, employees may feel insecure and resistant to these changes. This can ultimately lead to a decline in the value of automation and a failed implementation. Therefore, based on the standards proposed by KPMG, it is crucial to establish systems and processes that foster mutual benefit and set shared goals. KPMG emphasizes that consensus must precede technical considerations.

The second issue is security. One of the ways the Internet of Things is being applied in factories is by transmitting information about equipment to smartphones and enabling immediate action. While there are no technical issues, security concerns, such as confidentiality leaks, could hinder technology adoption. Expanding the adoption of new digital technologies can be slow if security concerns are not addressed.

Executive Director Lee Soon-yeol stated, "Security risks are often under-recognized, or even if recognized, future threat response plans are inadequate. Management's commitment is crucial to addressing this." He continued, "Since there are no established security standards, the government needs to establish standards and provide training to broaden the base."

Unlike banks, factories are complex to set up due to their diverse equipment and facilities. Furthermore, as the work environment becomes increasingly digital, failure to implement security measures can result in significant losses. This is an urgent issue and a pressing challenge facing the ongoing development of the IIoT. A prime example is the Stuxnet worm, believed to have been developed by the US and Israel, which attacked Siemens' software and equipment. This could lead to catastrophic consequences, such as hacking sewage treatment plants or railway systems.

As security issues, a key challenge facing the IIoT, emerge, the security market is expected to grow this year. Contrary to initial concerns, banking has seen security technologies mature, leading to the commercialization of phone banking and internet banking. This has led to the emergence of new business models driven by transformation, such as Alibaba's Alipay and Kakao's KakaoPay. Manufacturing, too, will benefit from enhanced security, fueling technological adoption and transforming its business model. KPMG predicts that, along with security, the utility-cost business model will grow in scale. This shift shifts from traditional product-centric services to offering experiences powered by diverse analytics and predictive capabilities alongside products. Like Uber and Airbnb, a pay-as-you-go model within the sharing economy will become the new revenue model. To achieve this, a mid- to long-term roadmap based on technology, platforms, and consumer understanding is necessary. Without this roadmap, companies will inevitably be left behind in the Fourth Industrial Revolution.

In his keynote speech at IIoT Innovation Day 2018, KPMG Managing Director Lee Soon-yeol explained, “In order to increase efficiency through IIoT adoption, we will provide insights on how to utilize IT and digital technologies in individual businesses and the importance of a roadmap.”