So, About The Internet Of Things…

With the IoT (Internet of Things) gaining increased interest the last few years, executives feel in awe. Admittedly, when physical assets can capture, communicate and process data – and collaborate – they create opportunities: production efficiency, distribution, and innovation all stand to benefit. And, with operational efficiencies and greater market reach comes substantial value.  There are three key opportunities and three key challenges however, say McKinsey, as follows:

Creating B2B valuefeatured

Business-to-business applications will account for nearly 70 percent of IoT – $5 trillion – over the next ten years. The impact will be greater in advanced economies. However, an estimated 38 percent of IoT’s value will be in developing economies. In fact, they could leapfrog the developed world because there are fewer legacy technologies.

Optimising Operations

Investing in IoT hardware is only the start. The biggest gains come when IoT data informs timely decisions. The greatest value will arise in Operations, for example using sensor data. Predicting when equipment is wearing down can reduce costs by up to 40 percent, and also cut downtime in half.

Inventory management could change radically

IoT takes guesswork out of product development by gathering data about products and how they’re used so manufacturers can modify designs. By downloading features, products can become more valuable, not depreciate.

Creating innovative business models

IoT can trigger new business models. First, the ability to track when and how assets are used allows providers to price and charge for use. Second, data from assets helps suppliers operate equipment more efficiently. Transportation sold as a service encroaches on vehicle sales.

As for product development, it will become service development, where value is co-created with customers. Developers will need to understand outcomes and shape offerings to facilitate them, and service providers will take on capacity-planning—utilising IoT to forecast demand.


  • IoT will challenge traditional roles – This also means that IT departments must join line managers to oversee systems. In retailing, one of the largest sources of value could be sales from in-store personalised offers. However, this will require sophisticated integration between information technology and operations technology.
  • Chief financial, marketing, and operating officers will have to link systems – Companies will retrain employees, so organisations can become analytically rigorous and data-driven. Analytics experts and data scientists will connect with decision makers and frontline managers. In some cases, decision makers will be algorithms – deciding automatically while managers monitor and set policy. Clearly, IoT systems will need to communicate and integrate.
  • Many companies will specify interoperable systems – Some vendors will choose common standard and IoT may exacerbate challenges from big data.
  • Companies will need to develop, purchase, customise, and deploy software that extracts insights – Algorithms will have to analyse in real time.

Facing up to the security imperative

Companies will rely on vendors to mitigate risks. However, connectedness with devices requires embedding protection into technology, processes and consumer interactions.

All in all, IoT will become a differentiating factor and senior leaders must take a systems approach to challenges and risks. That will allow companies to capture the full range of benefits. 

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