Three Pitfalls That Are Limiting Your $11 Trillion IoT Potential – And How You Can Overcome Them

Joerg Lange and Kai Wussow

The Internet of Things (IoT) and Industry 4.0 are presenting incredible opportunities for greater innovation. As every physical object – from industrial sensors to our homes and bodies – becomes connected, executives are eager to profit from the possibilities. In fact, McKinsey Global Institute estimates that IoT-based technology and services will bring between $4 trillion and $11 trillion in economic benefits worldwide by 2025. More striking is that most of its value will come in the form of services – not products.

While the potential is there, most executives are only scratching the surface of what the Internet of Things and Industry 4.0 can deliver. According to the same McKinsey report, less than 1% of all business data is used. And once the information is finally put to work, decision makers are most likely just setting alarms and real-time control with it.

Companies must adapt to this era of increasing hyperconnectivity to make the biggest gains. What’s needed is an incremental approach to digital transformation that moves the business network from predictive maintenance to service monetization – without disrupting operations and customer service along the way.

Innovation Matrix: The canvas for fostering innovation

Companies can adopt business scenarios that are transformational by creating value through deep process and data integration. R&D, sales, manufacturing, supply chain, and aftermarket service – every one of these areas possess information that, when combined, can generate insights that bring innovations in products, processes, and business models.

Yet, there’s a fundamental challenge that’s keeping customers from making this happen: Innovation management driven by predicting the future. While no one can truly foretell how well a new invention or change will be received and prove useful until it is created and put into use, there is a set of methods that can help improve the accuracy of our predictions.

This is what practitioners call the Innovation Matrix. By incorporating structure and firm guidance into the undefined, somewhat chaotic discipline of business innovation, the approach enables greater understanding and proper mitigation of the typical pitfalls along the innovation journey.

Here are three main areas that should be considered:

Trap #1: A utopian, myopic mindset

With every great idea comes the refusal of acknowledging real-world obstacles. Take the automobile, for instance. Without the existence of paved roads, it was not a feasible invention – at that time. But as soon as roadways, highways, interstates, and massive bridge structures became the norm, the automobile proved to be a necessary part of modern life.

The Innovation Matrix advantage: By building hypotheses and scenarios during the design phase, prerequisites can be generated and addressed before investing in ideas that may be ahead of their time.

Trap #2: Technical blinders

The market cannot be defined by technology. Years ago, we saw this happen in the music industry. As the Internet made it easier for people to share music from all over the world, the industry decided to fight this trend and continue to distribute music through a physical product: CDs and cassettes. However, with the imaginative efforts of Steve Jobs and his team at Apple, the music industry realized the full potential of distributing content online.

The Innovation Matrix advantage: By looking at the market as a whole, you will see how your innovation applies to how consumers or employees interact and use technology. This opens doors to opportunities that go beyond the products you manufacture or even the services your industry traditionally provides.

Trap #3: Metric-driven arbitrariness

Whenever decision makers are narrowing down potential business models or choosing a business case, there is always the risk of not taking into account any underlying requirements or constraints that may surface in the market or arise when new technology is implemented. Managing by numbers and mere logic will always bring about unforeseen barriers – or worse, imminent failure.

The Innovation Matrix advantage: Innovation does not take hold overnight. Technology sometimes needs to mature to support it. Other times, the market or the workforce have to experience the problem that the innovation solves.

Once these three common pitfalls are identified and widely understood, companies can keep up with the rapid pace of change and systematically gain insights into the future in real time.

Until recently, 3D printing has been the purview of hobbyists, but that’s changing as equipment and material costs drop, and manufacturers must be ready. Learn more about How 3D Printing Will Disrupt Manufacturing.


About Joerg Lange and Kai Wussow

Joerg Lange is the Service Portfolio Manager at SAP. Kai Wussow is a Chief Business Consultant at SAP.