The $19-Trillion Question: Are You Undervaluing The Internet Of Things?

Shelly Dutton

Commuters at a busy station --- Image by © CorbisFor a few years now, analysts have been working hard to quantify the value of the Internet of Things (IoT). IDC predicts it will bring $7.1 trillion in revenue by 2020. McKinsey calculates between $3.9 trillion and $11.1 trillion by 2025. And Cisco foresees an even bigger impact of $19 trillion in the next few years.

No matter how we read these numbers, the conclusion is all the same: The growth potential of the IoT is widespread and significant. However, do businesses truly understand the value the IoT is poised to bring?

If you ask Frank Gillett, vice president and principal analyst at Forrester Research, the answer is “most likely not.” “While 46% of respondents strongly agreed that IoT enables businesses to operate more efficiently, only 34% strongly agreed that IoT enables new types of business models,” he reports during Americas’ SAP Users’ Group (ASUG) Webcast “Connect and Transform Your Business with the Internet of Things(registration required). “Even when prompted about business model innovations, only about 30% identified new products and revenue streams enabled by IoT.”

The IoT is undervalued, and executives are missing out

According to recent McKinsey research, most executives are eyeing improvements in asset management (66%) and the customer experience (64%). For example, some are improving customer engagement through interactive experiences (43%), enhancing service capabilities (41%), raising service levels by detecting issue early on (39%).

Unfortunately, this also a missed opportunity for most companies: Business transformation.

“Organizations see IoT as more about efficiency (46%) and improving customer experiences (42%) rather than a catalyst for business model innovation (34%). There’s just not enough understanding to prompt new business models,” reveals Gillett quoting his research.

Although more than half (54%) of executives envision service innovations, only 30% are focused on generating new products and revenue streams. This is despite 95% indicating that their applications and processes can be enhanced by IoT!

What is the real value of the IoT?

In the connected world, there are two places to look for opportunity:

  1. Connected products. If your business makes a physical good, there’s an opportunity to use the IoT on or around the product to improve the customer experience.
  2. Connected assets. Here, you can either purchase connected products and assets or retrofit existing assets with IoT-enabled devices.

To embrace these key advantages required to fully compete in the digital economy, the CIO needs to collaboration with every line-of-business executive. For most businesses, IoT ownership is quite decentralized – with 74% citing three or more executive sponsors. As this distributed approach continues, it becomes more challenging for IT to integrate all this information throughout the enterprise and deliver it to everyone who needs it.

By connecting with each of these functions, CIOs can help the entire business network mature along the IoT adoption curve by targeting:

  • Optimization through physical assets. This fundamental step focuses on improving assets and equipment use to schedule preventive maintenance and avoid surprising outages. This impacts every resource – ranging from hospital gurneys to escalators and large machinery.
  • Innovation of new products and services. The real value of the IoT is the ability to innovate and differentiate. Take standard shipping containers, for example. Sensors can keep track of each container. But, the business can also invent a new revenue stream and provide better service, experience, and value by offering this information as a premium.
  • Transformation of customer engagement. For the IoT, this is its true potential. Now that processes and services are maximized, the business model changes. One great example is Under Armour. Recently, the popular athletic apparel and footwear provider purchased a number of fitness apps. By syncing sensors embedded in the brand’s clothing and shoes with these apps, their customers can track their performance for a flat fee. This enables Under Armour to look at this data and determine how they can add more value to the customer experience.

For more information on how to tap the full potential of the IoT, attend the ASUG Webcast “IoT: How to Plan for When (Almost) Everything is Connected” on October 27, 2015.


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