Internet of Things (IoT) is more than just a technology. By analysing IoT-gathered data, and leveraging the potential of the same, companies can strengthen and transform business models for the long term. This is what we at HCL call IoTization.
IoT epitomizes the expanding universe of devices and sensors that generate a humongous amount of granular data about our world. ‘Things’ include everything from sensors that monitor the weather, energy usage, assembly lines, and even vehicles. All types of devices are now linking, and connecting. These IoT-enabled conversations between sensors, devices and products is what makes IoT one of the most compelling propositions that companies face today. Today, you may be a company delivering office printers, medical devices, or internet services. However, tomorrow will belong to that breed of companies which can engineer data to provide insights on product usage and applications. With IoT, companies can harness data from sensors to enhance the way they design, upgrade and maintain devices and products in the field. Apart from greater efficiency, companies with IoT can adopt mature business models, and have greater functionality, and levels of service.
According to Gartner estimates, the adoption of IoT reached 43% of enterprises by the end of 2016, some of the biggest adopters being companies in the oil, gas, utilities, automobiles, wearables, mining, healthcare and manufacturing industries. Mckinsey Global Institute estimates a potential economic impact—including consumer surplus—of as much as $11.1 trillion per year in 2025 for IoT applications in nine settings. In its 2017 Tech Predictions, IDC says that in 2019, worldwide spending on digital transformation initiatives will reach $2.2 trillion, almost 60% larger than 2016. But for now, IoT is still in the minority when it comes to its full-fledged adoption.
Here are some of the barriers that companies face when adopting IOT:
- The full of potential of IOT is realized only when we integrate systems and products, and when data flows across systems seamlessly. However, a typical organization today has invested in setting up IT silos, be it CRM, supply chain, manufacturing etc. It will be expensive to replace the existing set up, and ways of working. What is needed is a platform which will preserve the initial investment made in the set-up, and in the ways of working. Also, this platform should be able to fluidly integrates all systems to ensure the flow of data, and thereby create business benefits.
- A high level of customization is needed to leverage the full potential of IOT for businesses. Every organization has a set of components that are very specific and integral to its business. IOT is very unlike a situation where you have solution or package application ready to deploy. Instead, IOT involves significant grounds-up and situation-specific development. There is a wide gap between what’s readily available versus what’s needed for IOT. This links to the point above, about IOT needing high investments before businesses can leverage its full potential.
- Assuming a business has made the investment in IOT, it now needs to ensure that the data it receives is consistent, and reliable. Data depends on how you interpret it. Algorithms can help, but what’s more needed is business logic, and mature data interpretation. The latter is still evolving, and this poses a risk to companies who have begun the move towards IOT.
- According to a Forrester analysis, “of the total potential value that can be unlocked through the use of IoT, 40 percent of this value, on average, requires multiple IoT systems to work together.” While interoperability across systems is required to unlock the full potential of IOT, lack of standards across data privacy and usage, security, and interoperability pose a challenge to both IOT incumbents, and newcomers. This however gives scope for policy makers and governments to begin playing a role in developing standards that will enable interoperability of IoT devices and systems.
- IoT is all about digitizing the physical world, and having devices and sensors connect to each other, to gather data that could redefine and enhance customer experiences, and create better business models. While the new crop of devices is IOT-enabled, there are still many gadgets, and infrastructure that are still only partially IoT-enabled. Businesses therefore face the issue of availability versus replacements of products/devices.
- It is still difficult to establish ROI in IOT situations. ROI on IOT investments cannot as yet be measured clearly, and numerically. Directionally too, it’s challenging to try measure ROI on IOT investments. While we may be able to demonstrate ROI to a specific use case, we cannot establish if the same parameters would be relevant to another case. The ability to monetise and generate profit in the IoT environment remains a challenge to the majority of enterprises today. However, this is about to change sooner than we expect.
It is recommended that companies considering IOT, or making inroads into the same, take note of the following:
- IOT is not an option. The sooner companies move to IOT, the better it is for the business and its customers. It’s true that consumer applications such as wearables and self-driving cars are getting the maximum attention. However, and according to recent reports, 93% of Global 500 companies would adopt IoT in some form in 2017.
- Look at the physical settings in which the IOT systems and applications will be used. Doing so will give companies a broader view of potential risks and benefits.
- Look at how the business intends to use the IOT data. Get beyond using IOT data merely to detect problems, or for control. Instead use the data for optimization and prediction. Also look at how much of the data collected is actually going to be used. According to McKinsey, ‘only 1 percent of data from an oil rig with 30,000 sensors is examined.’
- It’s extremely crucial that companies establish security, and interoperability between their IOT systems in order to leverage the maximum value from their IOT investments.
- For best results, integrate information and operating technologies (IT, OT), and IoT. All three aspects need to come together for better enterprise integration and value.
From experience with IoTizing various businesses, here are some tried and tested tips for those companies that are still hesitating to take the plunge:
- Get the CEO on board to lay a strong foundation for IoT initiatives. IoTization of a business demands CEO commitment to build and implement a policy framework that creates ownership and sharing of data collected. We foresee a time in the near future where user data will far exceed the value of the product/device itself, pushing down the price of the product substantially! For example, Tesla today has customers sign an agreement at the very onset that allows Tesla to collect and use data from the cars. This is a far cry from the traditional ‘sold and forgotten’ model that is synonymous with the auto industry.
- The business leadership also needs to ensure that the two worlds – Operations and IT – stay connected for organizational balance, proper communication and clear operational responsibility between functions in order to leverage the full benefit of IoT.
- Ensure that data collected is leveraged to the maximum. The true business value of IoT comes from the analytics of sensor-data and the improved customer experience basis that. The ultimate goal of IoT is after all not sensor-data, but data that can help companies understand both people and things. Like in the case of machine learning-assisted video analytics that track an audience’s movements during a football game to reveal the crowd’s level of engagement.
- It is still early days for IoT, and yes, there is a lack of standards for IoT devices. Companies therefore need to continuously study the devices they deploy, and carefully document how they gather information from them. This process will help tide over the lack of standards, while helping identify possible challenges. There are as yet no set IoT standards for connected office/home printers, or coffee makers. But both devices can transmit information to the manufacture about how many prints or pots of coffee the consumer takes/consumes in a day. This opens up a new world for the manufacturers, a world where IoT product usage data yields actionable marketing insights into customers and business operations.
- Ensure that the data is secure. IOT’s security challenge comes from the large number of devices, which in turn points to the challenge that being scalable brings. To overcome these challenges, companies will need a secure and scalable IOT platform.
IoT is for the long haul. Companies need to take a long-term view considering all aspects of business, technology, security, processes and people required to operate in the IoTized environment.
For those companies that have gone ahead and taken the plunge into IoT, their approach should comprise of frequent IoT assessment exercises to evaluate the IoT implementations for its benefits versus the risks, and other issues. To take IoT initiatives to the next level, companies need to define a robust IoT strategy, considering business challenges and how IoT can help solve the same. One must consider IoT for the entire business value chain and plan the initiatives accordingly. The actual implementation need to be agile.
In conclusion, let’s look at the benefits IOT brings:
Customer Experience: It revolutionizes customer experiences, and enhances it manifold.
Business Model and Efficiencies:
- It creates better business models – models that are high on the uniqueness quotient. IOT is expected to benefit only mature business models
- It helps companies bring out better, more advanced and effective products and services
- It drives operational efficiency (resource management, asset utilization)
- It helps in better predictive maintenance
Personalization: It aids customization, and personalization (both types – mass and hyper personalization)
IoT is the way for companies to leapfrog into the future and stay relevant to their customers. The demand for better customer service is an ever increasing one. Organisations are constantly looking at ways to reach their customers proactively, and this is where IoT can help.