The (un)connected factory floor

I wrote a short blogpost on why I personally think that we are still years away from mass adoption in Industrial IoT.

Why is it so painful to find clients in Industrial IoT

When walking through factory floors at manufacturing companies you will realize that most of the exciting, interesting and crazy things and visions that startups and VCs mostly talk about are indeed very interesting but yet not reality. In the real world out there the fully connected factory floor is just a desirous theory.

I think the graph below describes the status quo pretty well. It is a survey based on a questionnaire that involved interviewing German managers of manufacturing companies. One of the questions that have been asked was:

What is the scope of digital technologies you use on your factory floor?

Source: Statista

I took Germany as an example as they are at least in a lot of fields leading in Europe (and sorry for the German description)- and therefore in most countries it probably only gets worse. What the graph says is that only 5% argue that their production is completely connected and 20% say it is partly connected. But what is even more astonishing, at least in my personal view, is that 46% of decision makers in the German manufacturing industry say that their production is not connected but they plan to connect it. Or — even worse — that it is not connected and it is not even planned to do so. You better hope for some of those companies that the generational switch comes sooner rather than later.

So when talking to startups we always emphasize this status quo because it means entering their target markets and rolling out their products is in most cases much harder than they originally anticipate. And the main reason is that most potential customers are just not ready. So understanding your target industry and define your clear target clients is a crucial element in your sales and go to market strategy. Even if you meet people from innovation departments that are equally as excited as you are doesn’t necessarily mean a lot since pushing your product into the organization is the difficult and important part.

So the big question that popped up in my head is :

Why are they not ready even if they are aware?

I make the blunt statement that in most cases it is not a technological issue — meaning that the technology to solve a specific problem would often be available. So what it is then — What are the challenges of Industrial IOT adaption?

Challenges to IIOT-Adaption (Source: Morgan Stanley)

A recent Morgan Stanley report listed the challenges quite nicely and I think those topics are the same across different industries and geographies — at least in my experience. Beside security and a lack of standardization in Industrial IoT (which I already briefly touched in my last blogpost — and that are indeed the most critical and important reasons that hinder mass adoption so far) is of course the legacy of manufacturing companies (in their backend systems, setup, etc.) and that getting it up to speed just takes time, resources and money. In addition you need the relevant people to execute and drive this change which turns out to be very tricky for a lot of industrial companies. No wonder — even for hot startups it is already a huge task to find the right tech talent in places like Munich and others. So imagine you are based on the countryside and want to attract those people.

Therefore it still need some time to overcome those challenges and until manufacturing companies are ready for a lot of new products.

I have a POC — what’s next?

If you mastered the challenges above, the client is ready and you convinced her or him that your solution solves their need and you did a successful POC — then congrats! Now you want to escape the pilot purgery that everybody in Industrial Tech is aware of. This is the hardest part. Getting POCs is rather easy compared to what happens afterwards — rolling it out at eg. one specific manufacturing site is the tricky part. And that is the stuff that later stage investors want to see when they look at Industrial Tech startups!

I want to highlight four bulletpoints to escape this phase faster and that are based on six recommendations by McKinsey. We also experience this regularly in seeing a lot of startup-corporate partnerships and relationships.

Source: McKinsey & Company
  • Think in use-cases bottom-line up and show that you can provide value for the factory floor worker — this is crucial, they are driving the change in the organization
  • Focus on the existing tech stack and know the tech setup(and do not assume that your product will work or will be easy to implement and then you realize it just doesn’t make sense — be better prepared in identifying your ideal clients as mentioned above)
  • Show them a clear path to ROI (61% of respondents see a lack of ROI as a major obstacle when implementing digital manufacturing solutions at scale)
  • Get the C-level engaged — digital transformation is C-level’s job at most clients; and it also speeds up the process

Who are your friends?

Let’s assume you are aware of the topics above, you got your POCs and even a roll-out within one client. But for you everything is just moving too slow!
So you wonder what is your silver bullet to crack sales, what people do I need to hire, what partnerships do I need, etc to leapfrog some of those issues. In my view there are 4 different kind of partners that I want to highlight and are relevant in Industrial IOT:

Source: Bain & Company

Those four different players are also going after the Industrial IoT market and want to capture some of the market share. They can be your partners or in a lot of cases also competitors. But in comparison to you they already own the client relationship — never forget that.

  • Cloud Service providers
  • Network hardware providers
  • Analytics vendors
  • Device/equipment makers

Work with them and you can definitely speed up the process — because working in Industrial IOT and scaling your company means that there is basically no workaround at the moment. And if you know one or find one let me know!

Survive to ride the market wave

To finish this up I quickly want to highlight one thing:

The trend is your friend

You are surfing a wave that won’t stop that if you look for example at the total volume of investments. Industry 4.0 investments will rise to EUR 2.62bn in Germany alone by 2020.

Source: Statista

And the market will not only grow in Germany but globally and Industrial IoT will be the main market for all IoT applications.

Source: Bain & Company

So I hope you enjoyed my short blogpost on the status quo of Industrial IoT adaption and if you have some thoughts, ideas, solutions, silver bullets, examples, etc. let me know and send it on to!


We started Speedinvest with the fundamental belief that the relationship between founders & investors can be different.

Andy Schwarzenbrunner

Written by

Startup investor (@Speedinvest) / I like technology🚀, people with interesting ideas💡, cycling🚴 and a united European Union 🇪🇺


We started Speedinvest with the fundamental belief that the relationship between founders & investors can be different.

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