Analysts predict the number of connected devices will increase rapidly in the next decade surfacing new business value around the Internet of Things, yet the reality is that most companies are just scratching the surface of their IoT potential.
For many companies an IoT vision starts and ends with basic connectivity and access for remote maintenance and upgrades. Connectivity is certainly the essential early step and foundation of IoT. However, greater value lies in the data mined thanks to connectivity and how a company uses the “smart” capabilities of its connected products.
In other words, manufacturers need to commit to the smart part of the connected products equation to truly develop a robust IoT strategy. This can be achieved by embedding smart features in today’s products to future-proof them for years to come. This “smartification” is key to staying relevant in the marketplace because simply being connected is not going to be a unique selling point for much longer.
Beyond connectivity, companies should explore these five specific areas of potential IoT value:
Product as a Service (PaaS): IoT provides tremendous capabilities to help companies deliver on the promise of the PaaS business model. Instead of selling products, manufacturers rent or lease the products and provide ongoing service to the end user to ensure customer value. This can decrease the cost of entry for end customers (e.g., hospitals interested in the latest MRI machines) while providing manufacturers with a steady stream of predictable, recurring revenue. IoT provides the remote monitoring and service capabilities that give both buyers and sellers confidence that the new model can deliver the benefits to both sides of the relationship.
Deep IT Automation: IoT gives new life to the old idea of connecting all IT systems inside an enterprise and integrating the data to support enhanced process automation. With IoT, companies can overlay connections and data on top of existing products and systems to streamline the integrations while providing vastly more performance and operational data automatically into business workflows such as product design, maintenance, and consumables replenishment.
Big Data Analytics: In theory, connected products transmitting data back to the enterprise should give the R&D team everything it needs to analyze product performance and update new designs accordingly. In practice, the exponential growth in the numbers of connected products and the volume of data means that new tools and processes for Big Data Analytics are essential to take advantage of smart connectivity.
Data as Currency: As Big Data Analytics take hold, companies will be able to unlock substantial new value from the data generated by IoT-enabled products, services, and systems. This will create significant new business opportunities for data synthesis, aggregation, and exchange with customers and business partners. For example, medical equipment manufacturers could potentially sell or trade demographic data; smart sign manufacturers can sell roadside traffic data, and smart farm operators can sell production and pollution data. These and countless other use cases raise all sorts of technical, legal, and social issues, of course, but the business potential remains enormous.
App Economy: The IoT app ecosystem will likely change the way smart, connected products are operated. Developers are racing to create business- and domain-specific applications for use at every level of the product lifecycle, raising new questions and challenges around monetization of the value created. As ever more players join the ecosystems supporting product development, production, sales, use, and service, new models for charging and settlement are sure to arise.
Important to highlight is that the areas illustrated in the diagram are not in complete isolation of each other. On the contrary – they will have significant overlap. For example, App Economy will be tied up with PaaS and Subscription Business Models, while Big Data Analytics will act as an enabler of the Data as a Currency concept.
As the list of five specific areas of potential IoT value above suggests, the business operations implications of IoT are multi-dimensional, affecting not only the R&D process for developing smart, connected products, but virtually every aspect of the business, including strategy, manufacturing, sales, marketing, finance, supply chain, IT, and support.
Most important, customer and user expectations will change dramatically with the growth of the always-on and connected reality. Companies have little time to waste in preparing for the change.
Now is the time to explore the next phase your company should embark on for greater IoT value.