3 Ways the IoT is Already Transforming Most Businesses
It used to be that your car was your car, your watch was your watch, and your thermostat was your thermostat. The Internet of Things is changing all that.
The IoT can equip just about anything to capture and share data, which organizations can use to tailor their offerings, update their business models, and strategically collaborate. The IoT is transforming products and devices into valuable data sources and communication channels. Organizations are seeking the best ways to enrich peoples’ lives and use resources more efficiently.
Fitness devices and smart homes are some of the earliest applications to emerge. Still to come are ways to harness information for new consumer applications, improved business operations, greener urban infrastructures, and more.
The IoT will continue to impact businesses in at least 3 transformative ways:
1. The Rise of Profile-Driven Customer Experiences
We already see banner ads related to our recent search terms online. Online advertisers use your web activity to optimize ad targeting, but they are mostly limited to the data that can be captured from your browsing and social network activity.
The IoT opens a rich data ecosystem for interaction in many other contexts. For example, the steps captured by your Fitbit could alert Nike — or any strategic partner — that your running shoes may be wearing out. You could expect relevant ads on your devices about new footwear for your fitness interests. But that’s just a beginning.
“The IoT data will also enable customer profiles on steroids,” explains Barry Levine of MarketingLand. An IoT-fed profile will have the potential to transform your customer experience with tailor-made interactions. Well-planned personalization could give you feedback on your stride and distance, schedule a delivery of new sneakers when you need them, or help you meet and share achieving your fitness goals.
The IoT will change the business model for making, marketing and remaining engaged with any number of consumer products.
A key challenge is data sharing. A 2015 report published by McKinsey & Company estimates IoT could provide “up to $11.1 trillion a year in economic value by 2025,” but interoperability between systems is necessary to unlock 40-60% of the potential economic value. IoT systems need to work together to help unlock IoT’s true potential.
2. Game-Changing Operational Efficiencies
The IoT may deliver the greatest economic value to businesses themselves. In manufacturing settings, the IoT is expected to have $1.2 to $3.7 trillion in economic impact by 2025. One way it can do this is predictive maintenance — helping operations management become proactive rather than reactive.
Think of a production line with sensors monitoring the operating conditions of the machinery in real-time. The data captured by the sensors signals a problem somewhere in the line that is currently only discovered when a breakdown occurs. Alerts tell employees where to adjust equipment, thereby reducing downtime and increasing productivity and safety.
When the American Society for Quality surveyed manufacturers with IoT-enhanced processes, they found dramatic results:
- 82% increased efficiency
- 49% experienced fewer product defects
- 45% increased customer satisfaction
3. Infrastructure that Stimulates and Sustains Business Growth
In the U.S., the number of major metropolitan areas (those with over a million people) will likely grow from 51 in 2012 to 70 in 2042. This growth will skyrocket the need to manage resources and services like energy, water, air quality and traffic flow.
The SmartAmerica Challenge (a government program to spur infrastructure improvements with Cyber-Physical Systems) predicts, “City governments will invest approximately $41 trillion over the next 20 years to upgrade their infrastructure to benefit from the IoT.”
Such a huge investment would stimulate economic activity and business development. But smart development does more than create jobs.
Salt Lake City invested in smarter public rail transit to spur more compact development designed to reduce traffic and pollution. Not only did it create nearly 1,300 jobs. It attracted firms including “Adobe, eBay, Goldman Sachs, Overstock.com, and Workday [who] have made office location decisions based in part on proximity to TRAX and FrontRunner stations,” says a BusinessWire press release.
IoT technologies in smart cities are expected to transform and reshape how cities operate. As communities use low cost sensors and Wi-Fi devices, local leaders and business partners can lower utility costs, decrease gridlock and greenhouse gas emissions, and even optimize parking space use. This helps improve quality of life, increase profitability, and create attractive, sustainable local economies that support more businesses and jobs.
To Seize Big Opportunities, Firms Can Start Small
To develop the IoT’s potential, a company can start with small steps. In one hotel, for example, a pilot project used sensors to make HVAC operations more efficient. The project saved the hotel “around $60,000 a year in one location alone,” just by regulating heating and cooling based on sensor data about where people were present in the building.
While there are numerous potential benefits, the IoT’s impact on business is in the early stages. Experts estimate that B2B applications will eventually capture more value than consumer uses. To make this possible, businesses will need to develop new technologies and business models designed to work with an increasingly rich ecosystem of data and channels.