Companies are leveraging a hyperconnected world of people, machines, and physical objects with embedded sensors in extraordinary ways to discover new business models that lead to new revenue opportunities utilizing digital transformation.
By capitalizing on the Internet of Things, companies today can do more than sell products and services. Companies that focus on outcomes that customers expect find themselves in an enviable position of offering significant differentiation from competitors. With outcomes as a focus, companies in every industry are reimagining their business models to innovate and create new products and services.
For CIOs, the Internet of Things is an extension of core business processes already at work in the organization. The challenge in the future is to leverage this powerful new tool in ways that propel the organization forward.
The Internet of Things
The Internet of Things (IoT) refers to a smart, connected collection of things (devices, equipment, and machines) equipped with sensors, software, and wireless connectivity. In the IoT, things can “talk” to each other and with humans by tracking, recording, transmitting, and analyzing data.
By 2020, the IoT is expected to comprise billions of things. With 2.5 billion people on social networks, a picture begins to emerge of its enormous potential. But what matters more for companies is the ability to tap into the high volume, velocity, and variety of Big Data being generated by a hyperconnected world.
Many companies are forging ahead with IoT strategies (or making plans to do so) but are struggling to scratch the surface.
A 2015 study by Forrester Consulting surveyed 366 IT and business leaders of enterprise companies. The survey showed that companies are focusing on gaining operational efficiencies leveraging the IoT. But companies are not yet tapping into the IoT to create new business models.
One core reason for the lack of action is a lack of talent. Among respondents, 75 percent said they did not have the required expertise to lead the complex development and implementation of IoT strategies. Another reason is lack of vision: 54 percent can see new services coming out of the IoT, but only 31 percent can see new products emerging.
The CIO role
CIOs today recognize that many technology areas touch the IoT, including cloud computing, supercomputing, Big Data, and in-memory computing. Capitalizing on the role the IoT can play in tandem with these other technological advances, CIOs can lead organizational efforts to make new and bold business models that differentiate their companies.
The CIO of tomorrow will play a crucial role in partnering with other C-suite and line-of-business owners. With IoT as a key driver, CIOs have an extraordinary opportunity to propel profound change, leveraging design thinking to create amazing IoT-powered end-to-end solutions that bridge the operations technology (OT) and the information technology (IT) worlds.
Some early adopters are making significant strides with the IoT. General Electric, for example, has pivoted its business model dramatically to become a digital-first, outcome-centric company. While it will continue to produce and sell big heavy electrical generators, it is also monetizing the power generated to create amazing customer experiences.
Under Armour, the athletic clothing maker, is digitally transforming itself beyond sport fashion and retail. The company now offers Big Data services that help consumers monitor their health and advise them on fitness through the use of sensors embedded in its products.
SEAT, Samsung, and SAP recently announced a partnership to create a connected car. They are developing a “digital key,” which can be shared with other drivers, to reconfigure the temperature and music settings remotely. The companies are also creating functions that let drivers reserve a parking spot while en route to a destination, for example, and pay for that spot using Samsung’s digital wallet.
With all of these technological advances comes risk, and not just in market uncertainty. As companies become more reliant on technology, CIOs must remain vigilant in protecting IoT devices from cybercriminals. The risks of controlling devices and networks or compromising the security and flow of data are real and present. These risks should not be discounted, but they also must not deter CIOs from innovating.
For consumers, the outcomes—how the products they buy affect how they live and work—are critical. From connected cars to wearable health monitors, the Internet of Things offers a transformative way to examine new business opportunities, create a more sustainable world, and improve people’s lives.
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