The Future Of IoT Isn’t A Tech Strategy – It’s A Business One

Marc Teerlink, Steve Mauchline and Sijesh Manohar

Part 3 of the 3-part series “Retail and Intelligent Technology

For many years, we’ve been predicting how many devices (or things) will be connected to the Internet by 2020, 2025, etc.

In fact, it’s estimated that by 2020 there will be at least 20 billion things connected to the Internet, or about three items per person. Is that all?

The future of IoT

So, what will the future of IoT in 2020–2025 (and beyond) look like? Research firms like Statista project more than 30 billion devices by 2020 and 75 billion by 2025 will be connected.

The bottom line is that we’re talking about a significant amount of “things” that present a lot of data capture information. And with that, many opportunities for those who see the potential value and (candidly) profit that can be derived from various approaches to IoT use cases.

Accordingly, a realistic view is needed about what your organization defines as a return on investment when compared to business strategy.

Warning: All projections for the Internet of Things are subject to change.

Customer expectations versus possibilities

The retail industry provides a unique series of interactions with customers across virtually all ages, backgrounds, employment types, disposable income, etc.

Retailers also have an appetite for using technology to interact and engage with customers. The limitations, then, are (seemingly) only limited by our ability to imagine the possibilities.

That’s a critical point – how can we imagine viable and workable use cases (out of so many possibilities) AND see what retail and other industries either have already executed or plan to do?

To bring this to life, let’s look at some examples where IoT-supported tech has been used with a high degree of success.

1. Optimizing perishable inventory

One of the biggest challenges for a food retailer is the very short shelf life of its inventory. As such, retail freezers and coolers need to be in proper working condition to ensure safety and quality of food items.

To support this, one food retailer equipped its freezers and coolers with sensors that regularly record the temperature. When deviations are discovered, alerts are sent to the store manager. Over time, the retailer automated this process – moving beyond manual monitoring when store associates periodically recorded the temperature.

As it happens, coolers and freezers can over- or under-cool. With simple automation, freezer vendors are immediately alerted to changes in temperature, thereby ensuring food safety at all times. This further reduces food spoilage.

Another food retail dilemma: One firm had a problem with certain perishable goods received in loading and left unattended for too long before being moved to the cool storage. This resulted in excess spoilage and waste. Using IoT technology that combines temperature and RFID passive tags, a timely warning system now sends alerts when pallets are left in non-refrigerated environments.

2. Building a better customer expeience

Several retailers are using various IoT technology solutions to improve overall customer experience in stores.

One retailer implemented a camera and sensor system to automatically detect queue lengths to open and close checkout counters in real-time when needed.

Another European retailer has implemented a sensor system in a bottle recycling machine to automatically detect when the machines are nearly full so they can be emptied in a timely manner, helping to minimize customer inconvenience.

IoT technology has also transformed vending machines to become smarter, which helps retailers study consumer interaction and consumption patterns and implement optimized replenishment plans. Innovative retailers are working to extend this by fully automating unmanned stores with sophisticated cameras and sensors.

3. Driving change in the retail industry starts with design thinking

Sometimes you need to get some distance from how you’ve always done things and look from another perspective. That’s design thinking in a nutshell. It’s not always about a moonshot – mostly it’s about doing things different with a better, faster outcome – at less cost, time, and effort.

You can help accelerate the process by thinking about the potential “wins” for your organization. As these examples demonstrate, investing even a relatively small amount of time can uncover and return much more. IoT is a lively topic, and rarely a week or two goes by before another imaginative use case is discussed by technology analysts or a new device hits the shelf.

Bringing the focus back to IoT

If creating net-new examples is too hard to imagine as a starting point, let’s bring the focus back to IoT in retail and what some would argue is the most obvious and compelling use of IoT.

A significant challenge in retail is potential lost sales or missed opportunities to sell goods. Often, store retailers don’t have the exact product a customer wishes to buy in the store. This problem cannot be solved by overstocking items; it requires innovative design and thinking.

Knowing all the locations of stock in the store can prove challenging, and sometimes “available” stock can be damaged or unavailable due to various types of shrinkage. IoT technology can help minimize some of these issues.

Usage of low-cost RFID passive tags on items can help pinpoint stock within a store, and innovative shelf sensors can provide a more precise count of inventory on the shelf. Getting the actual stock count in the store helps the forecasting and replenishment process become more accurate, ensuring that replenishment quantities are optimized to the actual situation.

RFID, of course, is not new, yet like many technologies, its price and cost of usage have decreased to the extent that the “tip point” is no longer just premium retail products. Now products that retail for just a few dollars can enable a solid return on investment – measured in months, not years.

Like many other sensor and tag technologies, the insights from this data are arguably of equal or even greater value than the pure accuracy in justifying the initial investment. RFID will pay for itself solely on the improvement of inventory accuracy and the positive impact on sales (this is a topic that could fill many pages of blog on its own). Based on that, what insights are as valuable as inventory accuracy?

One example is an apparel fashion retailer. Utilizing RFID technology, the retailer could know what garments, styles, and colors customers take into a fitting room, which items are not taken in as regularly, and what gets purchased. Think about what this would allow your merchants to do with targeted customer marketing.

Another IoT technology, Edge, enables you to get hyper-local and deeply understand individual customers in individual stores and link these insights to “why.” Using a blend of experience and operational analytics provides a huge competitive advantage. Edge allows retailers to extend parts of the business process to run locally.

For example, Edge technology can be used to collect detailed sensory information from various parts of the store to calculate specific storeinventory for each item. It can also recommend when to move stock from the back of the store to the shelves.

This process can run completely in a local-only mode and synchronize with the central systems periodically or when required for other central processes, such as forecasting and replenishment.

So what does all of this mean?

The price of sensors and tags has decreased to the point where the debate has moved from whether investing in IoT tech is for premium customer segments to the competitive advantage offered by IoT in every aspect of retail. IoT is ripe for thorough assessment for making 2019–2020 investments.

IoT tech is not the solution to all retail problems, but it can be a significant player in delivering value from emerging tech to retailers seeking competitive advantage in an increasingly challenging retail environment.

IoT is a business opportunity, not just a tech opportunity

We started this blog with the question of whether or not to keep experimenting while waiting for greater IoT maturity, or if you should plan and get going to monetize a robust IoT strategy (balancing not investing too early versus investing too late).

In short:

  1. IoT is real. It’s present – and there are lots of data and opportunities for those who engage.
  1. IoT is viable. Actual company examples make it more concrete.
  1. Design thinking can help make the getting-started process easier.
  1. Finally, it’s about getting practical advice on how to do it. What’s stopping you?

Successful Internet of Things strategies are typically based on a small, on-premises hub and a cloud-based approach to realizing the benefits. It is extending the basic use cases, such as artificial intelligence and machine learning. Since some of the benefits from IoT require moving to a partial cloud, that will need to be planned as well.

We often tend to think about IoT by focusing on the growth of sensors and devices, but when you take a step back, it’s about developing and utilizing a strategy to combine IoT and ML through AI and robotic process automation in a manner that delivers the step change desperately needed in the competitive world of retail. Not just a tech opportunity – IoT is a business opportunity!

Uncover five trends that will determine the customer experience over the next decade. Download the report.

This article originally appeared on Medium.

Marc Teerlink

About Marc Teerlink

Marc Teerlink is Global Vice President of Intelligent Enterprise Solutions at SAP. He drives the strategy, vision, and production of intelligent technologies delivered through the SAP Leonardo Portfolio. Prior to his current role, Marc was IBM Watson’s Chief Business Strategist, where he oversaw the new offerings portfolio for the Watson platform during IBM's formative years of artificial intelligence. During his time at IBM, Marc executed a number of successful transformational projects and created and delivered cognitive computing solutions and services offerings. Before IBM, he built expertise as a banker, consumer products business manager, consultant, and change leader within nine countries across three continents

Steve Mauchline

About Steve Mauchline

Steve Mauchline is a Business Architect in SAP North America's Presales unit. He helps customers rationalize business capabilities to ensure clear understanding of their customer vision & strategy and provides business capability recommendations to operationalize the future business and operational model. Prior to his current role, Steve spent 10 years with IBM, focused on software and services solutions in Retail, Consumer Products and Transport & Travel industries. He spent his formative years working for a large UK Retailer, building his expertise across stores, supply chain, merchandising and business analytics.

Sijesh Manohar

About Sijesh Manohar

Sijesh Manohar is a Senior Product Manager in the IoT Engineering team at SAP Labs LLC. He is currently working on designing and driving the next generation IoT products. Sijesh has spent 20 years in SAP in various functions within software product development and successfully led several development projects within SAP to deliver business application products in areas of Supply Chain and Sustainability. His expertise is in formulating new products for the broader market by synthesizing requirements working closely with co-innovation customers and to inspire and marshal teams to deliver enterprise ready software products in quick time with well-defined feature prioritization.