Module:5

Value engineering and Analysis

 Content
• Principles and phases of Value Engineering and Analysis
• Frameworks for Value Engineering in IoT solutions
• Cost-function analysis of IoT solution components
• Action plans to incorporate Value Engineering
• Data modelling requirements
• Development models: Waterfall, Agile, Spiral, V models
• Monetization models for IoT use cases - ‘Outcomes As A
Service’ model.
 Value Engineering (VE) - Introduction
• What is Value?
– Something is held to deserve, Importance ,Worth, Usefulness of something
• Value in “Value Engineering "is
– It is the ratio of function to the cost
– Value can therefore increased either by increasing the function or by decreasing the cost.
– It is also called as the lowest price you must pay to provide a reliable function or service
• Value Engineering is a conscious and explicit set of disciplined procedures
designed to seek out optimum value for both initial and long-term investment.
• Value Engineering (VE) is not a design/peer review or a cost-cutting exercise.
• VE is a creative, organized effort, which analyzes the requirements of a project
for the purpose of achieving the essential functions at the lowest total costs
(capital, staffing, energy, maintenance) over the life of the project.
• Through a group investigation, using experienced, multi-disciplinary teams,
value and economy are improved through the study of alternate design
concepts, materials, and methods without compromising the functional and
value objectives of the client.
How Value Engineering works
Value
 VE phases
• Information Phase
– Understand, Analyze and Define the objectives and key criteria
governing the project.
• Speculation (Creative) Phase
– This step in the VE study involves the listing of creative ideas.
• Evaluation (Analysis) Phase
– In this phase of the Project, the VE Team, together with the Client
and/or Users
• Development Phase (Value Management Proposals)
– During the development phase of the VE study, many of the ideas are
expanded into workable solutions.
• Presentation Phase (Report/Oral Presentation)
– A briefing/oral presentation of results is made to the Client and Users, as
well as the Design Team representatives.
 Frameworks for VE… cont…
• Defining drivers or strategic vision:
– Always look for the company vision, mission, strategic view
• Defining business capabilities:
– Ask which benefit will bring to the company different areas/departments
– Keep in mind that the project goals must be aligned with the company’s strategic
vision
– Do not use more than one capability with the same weight
• Defining value components:
– It is just a label. It is easier to derive it from the project backlog
• Grouping functionality that are related from business perspective
– More than one component may be needed to activate value
– Should be small, preferably fitting into one sprint. This way we keep an agile value
demonstration throughout the project
– After value prioritization we should review the prioritization considering components
dependency
 Value engineering vs Cost cutting
VE is to find the lowest cost way to perform the desired function
rather than the lowest cost way of producing the product.
 Cost-function analysis of IoT solution
components
Factors That Determine IOT Implementation
Costs
1. Hardware & Software
2. Infrastructure and Retrofitting
3. Planned Downtime
4. Consultation Services
5. Subscription Fees
6. Security Measures
 Action Plan - VE
• Review the program
• Perform a functional analysis of the facility
• Obtain the owner/users definition of value
• Define the key criteria and objectives for the project
• Verify/validate the proposed program
• Review master plan utility options (e.g. Central Utility
Plant versus individual systems)
• Offer alternative solutions (square footage needs per
function, adjacency solutions, etc.)
• Verify if the budget is adequate for the developed program
 Action Plan… Cont.
• Create a Value Roadmap
• The roadmap should include
– Inception/setup
– Planned releases: define set of value components that
could or should be moved to production together
– Value activation: plan move to production
• Demonstrate Value
– Value must be delivered and demonstrated to
guarantee value perception
 Monetization models for IoT
• “A business model describes the rationale of how an
organization creates, delivers, and captures value.”
• The top IoT business models you can use to increase
revenue, adoption, market share, and the profit of
your product.
– Subscription Model
– Outcome-Based Model
– Asset-Sharing Model
– The “Razor Blade” Model
– Monetize Your IoT Data
 Subscription model
• When you sell a product or a service, it generates
one-time revenue. But when you involve a
subscription model, it generates revenue at every
regular interval of time.
•  This model enables you to offer a daily, weekly or
monthly subscription, along with paid upgrades.
• Some common IoT applications using the
subscription model include “monitoring as a
service” and “predictive maintenance as a service”.
 Outcome-based model
• This model benefits customers at large as they have to
pay only for the outcome that the product provides to
them instead of paying for the entire product.
• Eg:
– Rolls-Royce Motor Cars Limited, a luxury automobile maker
now provides jet engines as a service for commercial airlines.
– The company keeps the ownership and maintenance of the
jet engines with itself.
– It charges a fee per engine flying hour to rent their engine to
the airline.
 Asset-sharing model
• When you buy expensive equipment, there
are chances that you won’t be able to utilize it
to its utmost capacity.
• With the help of this business model, you can
actually sell the capacity of your equipment
(which is not being fully used by you) so that it
can be utilized to its greatest capacity across
various customers.
 The “Razor Blade” Model
• Your IoT product can be designed for selling other
products. 
• In this model, you might sell the IoT product at cost or even
at a loss since the goal is to get the product in the
customer’s hands, so you can start selling your other
products.
• (the goal is to sell more and more disposable razors, and
therefore, the razor handle is usually sold at cost or even
given away for free)
• Eg: HP connected printers: Automatically reorder ink
cartridges
 Monetize Your IoT Data
• Data has vital significance in IoT. Without data, IoT is
like equipment without fuel and power supply which
leads to no utilization of the asset.

• Think about companies like LinkedIn or Facebook. They

collect a huge amount of data from all of us (often for
free) and although they provide us (the user) with
value for providing that data, the real value is provided
to advertisers and other third party companies that
use the data to promote their products and services.
 Other two business models
• Pay-Per-Usage
• Offer a Service
 Pay-Per-Usage

• Having sensors on your hardware device means you can

monitor your customer’s environment and how much they
use your product. This opens the door to an innovative IoT
business model where you charge your customer for the
amount of time they are actively interacting with your
product.
• In this IoT business model, the goal is not to make money
on the device itself. Instead, you are using the data
produced by the IoT device to track usage.
• Here’s a good example of this IoT business
model: Metromile—Pay-per-mile insurance
 Offer a Service

• You can use an IoT product to offer a new service (or enhance an existing
service) to your customers. In this case, I’m not talking about an “as a
service” type model. Here, I explicitly mean providing a service, with real
people involved.
• In this IoT business model, the IoT product can be an enabler and
differentiator for your company to sell a service. Here are a few examples
of this IoT business model
• Use an IoT product to monitor machinery, predict maintenance, and then
sell a maintenance contract.
• Install IoT devices in a smart building to measure energy consumption.
Then sell an energy audit and energy optimization services.
• Implement IoT devices in a manufacturing floor to measure efficiency and
throughput. Sell consulting services to optimize your customer’s process.
 Reference pages
• https://www.wbdg.org/resources/value-engineering
• https://www.wipfli.com/insights/blogs/manufacturin
g-tomorrow-blog/180515---cost-to-implement-iot
• SDLC Models: https://existek.com/blog/sdlc-models/
• https://medium.com/existek/sdlc-models-explained-
agile-waterfall-v-shaped-iterative-spiral-e3f012f390c5
• IoT Business Model
-https://www.avnetworkshop.com/IoT-business-
models-to-monetize-product.html