ARE YOU READY FOR THE INTERNET OF THINGS?
What CEOs need to know to compete in the next great wave of value creation in manufacturing.
Unless you’ve been living under a rock, you’ve probably heard quite a bit about the Internet of Things (IoT). The buzz around employing advances in embedded sensors, processing, data analytics and wireless connectivity to enable the type of machine-to-machine communication that can revolutionize businesses has definitively become a roar. For manufacturers, the
implications are huge. McKinsey estimates the IoT could unleash as much as $2.3 trillion in new economic value worldwide by the year 2025.
In fact, the IoT topped Garner’s Hype Cycle for Emerging Technologies last year, bumping Big Data off the peak. To some, this might sound like a potentially dubious distinction, given the somewhat negative connotations of the word “hype.” However, what occupying the pinnacle of Gartner’s Hype Cycle actually indicates is that the market has enormous expectations for an emerging technology. In making it to the peak, the IoT joins a venerable list of technologies with game-changing potential, including 3D printing, gamification, wearable user interfaces and cloud computing. In other words, expectations may be inflated, but the potential is undeniable.
Yet the excitement around the IoT’s capabilities is also a source of anxiety for business leaders, who face the challenge of getting their arms around yet another emerging technology. For value creation to happen on the scale predicted by McKinsey, manufacturers must be ready to collect, analyze and capitalize on vast streams of data from customers, suppliers and even products themselves, all arriving at increasing volumes and speed.
Further complicating that formidable task is the fact that the term itself has yet to be clearly defined, agreed participants at a recent Chief Executive roundtable held in partnership with Microsoft. “The hype on IoT is actually pretty deafening,” noted Barb Edson, general manager, marketing, for Microsoft Cloud & Enterprise. “Yet, the reality is that there is not even a common definition for it.”
However, Edson went on to urge CEO participants not to let the murkiness surrounding IoT—the cloud around cloud-enabled technology—to sour them on pursuing the business opportunities it
represents. “Many people are scared of IoT from a business standpoint, and they really shouldn’t be,” she explained. “It’s not about ripping out and replacing existing systems. It’s about looking at which business processes you can really impact. Start small and you can have a big impact.”
IoT can be viewed as an evolution rather than a revolution, building on the infrastructure companies already have in place, she added, pointing out that most companies today are already gathering massive amounts of data on myriad devices. More of a concept than any one specific technology, IoT involves leveraging connectivity to efficiently collect and analyze that data to make more informed business decisions, identify opportunities and predict customer behavior more effectively. That can be as simple as a trucking company’s effort to automate maintenance of its vehicles (see sidebar: “M.G. Bryan: Curbing Breakdowns”) or as complex as an enterprise-wide endeavor to collect, integrate and organize sensor data from remote equipment across global supply chains.
Delving Into Data
Those struggling to fully leverage connectivity should take solace in the fact that they are not alone. Most companies are early on the IoT learning curve. Several CEO roundtable participants expressed frustration about being unable to make effective use of the huge amounts of data flowing into their companies.
“The ability to install sensors and get millions and billions of bits of information is pretty straightforward,” noted Bob Nardelli, CEO of XLR-8. “The challenge that some of the smaller companies, and maybe even some of the bigger ones, are having is when you get to the data analytics. There’s the question, ‘Okay, I’ve got all these sensors. We’re recording all this data. We’re on this thing called the Cloud. Now what do I do with it all?’”