The Internet of Things (IoT) is transforming society as a whole and, in particular, businesses by creating never-seen before operational efficiencies and enhanced customer experiences. Early implementations of IoT have focused on the potential to transform business models that will drive higher operational efficiencies. However, these early adopter organizations have not yet recognized IoT’s potential as a massive change agent across organizations leveraging this new platform for new product development and untapped revenue streams. In fact, a recent study by Oxford Economics found that today only 8 percent of organizations are actually using more than 25 percent of their IoT data. To maximize the impact of IoT investments, these organizations must leverage the revenue as well as the efficiency benefits that IoT brings them. Today’s top organizations’ priorities encompass the improvement of customer experience and better leveraging data into actionable information for strategic decision making. IoT provides opportunities to share information with customers, improve customer experience, and to gain insight into customer preferences.
Comparatively speaking, the adoption rate of digital infrastructure has been 5X faster than electricity and telephony. This infrastructure development has been a foundation for the IoT revolution. There are multiple reasons for the fast growth of the IoT space:
- Mobile technology, networks, and the proliferation of internet connectivity at lower costs have eased the ability for device manufacturers to integrate their devices with the rest of the supply chain.
- There is willingness of companies and consumers to adopt more and more connected devices to their everyday business operations and lives.
The benefits of connected devices are spreading across industry ecosystems globally. Analysts are predicting that 30% of all industry leaders will be disrupted by digitally enabled competitors by 2018. In addition, recent research shows that by 2025, the IoT’s economic impact could reach US$11 trillion, or 11% of global economic value, and by 2030 the IoT could influence nearly the entire economy.(1)
A key ingredient of IoT are smart devices. They will come in every shape and size, from nanochips and smart dust to gigantic machines. The number of connected things will grow exponentially from 15 billion in 2015 to 200 billion in 2020.(2) But smart devices are just one of the components of IoT; there are other technologies that make the IoT such as cloud computing, data analytics software, mobile, and machine-to-machine communications.
The ultimate value of IoT will come from the actionable information that is synthesized and applied to improve a range of activities across diverse industry ecosystems and people’s lives. The impacts of IoT in these ecosystems will include cost reductions, optimization of supply chains, people safety, population health management, and many others.
Figure. Examples of industry ecosystems impacted by the IoT revolution
The sheer volume of IoT devices connected and communicating across all these ecosystems require careful security and privacy considerations. Authentication of critical data is an emerging security focus that will drive investments that will eventually solidify the adoption of IoT platforms.
1. McKinsey Global Institute, The Internet of Things: Mapping the Value Beyond the Hype (McKinsey & Company, June 2015)
2. “A Guide to the Internet of Things,” Intel Corp.