The Internet Of Things Transforms The Sum Of The Parts, Not Just The Whole

Tom Raftery

Technology is usually the breath on the back of our necks, nudging us to do something differently. But historically, that’s also been part of the problem – it’s urging us to essentially do the same thing, but faster, better, or more efficiently by replicating our existing processes digitally. Not anymore. In the same way that the Internet of Things (IoT) is disrupting business models and business as usual, it is – somewhat ironically – changing the way we must respond to change.

Let me explain. If you’re competing on price alone, your days are probably numbered. (Think globalization, commoditization, shrinking product margins, and diminishing returns from a product-centric approach). As we enter the era of IoT, product-oriented companies are abandoning traditional business models in favor of a more lucrative outcomes-based approach. Airbnb runs a hotel business with no hotels. Uber runs a taxi service without owning any taxis. Rolls Royce sells “Power By The Hour” rather than engines. In fact, according to the OECD, manufacturers that have digitally transformed themselves are experiencing double-digit growth in productivity, market share, and revenue, in contrast with the flat or declining performances of their competitors that haven’t.

This is having a transformational effect on almost every division of a company. Thanks to sensors at the edge, connected assets are enabling chief operating officers and plant managers to redefine their approach to traditional challenges, such as unscheduled downtime, capacity allocation, scheduling, and materials optimization, shifting them from reactive to proactive, real-time, and predictive. It’s not simply automating old processes faster, rather addressing complex challenges in a completely different way.

Likewise, chief supply chain officers are using IoT for intelligent supply chain execution, logistics, and supply chain planning for near-real-time replenishment, smart warehousing, intelligent transportation optimization, and real-time track and trace. It’s a level of visibility, agility, and collaboration in connected supply chains that’s never been feasible in the past.

Sales and marketing are also feeling the transformational effects of IoT. Chief marketing officers, chief customer officers, and sales directors traditionally performed activities focused on identifying and attracting prospects, selling them products, and then servicing customers. Today, these processes have been replaced with omni-channel, digitally immersive experiences that are personalized, location-aware, and capable of “what if?” scenario planning for opportunistic promotions.

Chief digital officers are also benefiting from IoT, particularly in the area of product and service management. Before IoT, R&D teams relied on interpretation and anecdotal input from field service engineers to get a full understanding of how products were faring out in practice. Service reports were arbitrary. In many instances, there was no fault found on service calls. Post-IoT, the picture is becoming increasingly different. IoT collects data automatically from machines and devices to foresee problems and identify troublesome parts, equip field service techs with the right tools and materials, and provide a feedback loop back into product design. Consumer habits, tastes, and even ideas can be fed back through a mix of automation and field service recommendation, ultimately redefining the relationship between business and customers.

For consumers, the arrival of IoT means life gets easier, more personalized, and more convenient. For businesses, life will never be the same again. Almost every division, every line of business head, and every department will be transformed in one way or another. The real issue is not whether a company’s business model will transform, (the forces of competition and disruption typically take care of that), but rather whether or not the sum of its parts will keep pace and do the same.

Find out how the different parts of your business can realize the value of IoT. Download IDC’s latest white paper, “Connecting Things to People and Processes.”

Tom Raftery

About Tom Raftery

Tom Raftery is Vice President and Global Evangelist for the Internet of Things at SAP. Previously, Tom worked as an independent analyst focusing on the Internet of Things, energy, and clean technology. Tom has a very strong background in social media, is the former co-founder of a software firm, and is co-founder and director of hyper energy-efficient data center Cork Internet eXchange. More recently, Tom worked as an industry analyst for RedMonk, leading the GreenMonk practice for seven years.