Connected devices have been around for some time now—long enough that business executives are well aware that the Internet of Things (IoT) is causing a disruptive impact on both consumers and companies across industries. Most executives today, unfortunately, know enough about IoT to be afraid of it, but not enough to know what to do with it.
This uncertainty stems, in part, from their listening to and reading too many so-called experts who state that IoT is the next biggest thing for their business, and who boast that IoT will change everything a business does. While these statements have some truth, they leave executives feeling that 1) IoT is too large, too complex, and too difficult to understand and control, and 2) they are betting their organization’s future on the success of this one effort.
They sit on the sidelines, paralyzed, feeling unsure about how to begin an IoT-enabled initiative, even though the conditions now are ripe for most organizations to implement IoT projects of their own. Network technology, for example, is now ubiquitous. The price of connected devices has dropped to an inexpensive level, as has the cost of both processing the information and the technology needed. And the speed at which the end-users expect organizations to react has shortened significantly.
This technology has the potential to dramatically modify every aspect of the consumer, product and enterprise interaction. But before we get there, we need to be clear on what IoT is and the enterprise’s ability to take advantage of it. And we can do that by demystifying IoT with a simple and clear definition, understanding IoT’s key challenges for business leaders and those for technology leaders, and following a straightforward and pragmatic process for taking on IoT.
A Simple Definition
The Internet of Things has only two components: The Internet and Things. These things are “connectable devices” ranging from an inexpensive temperature sensor to a multimillion-dollar harvesting machine, so each thing is a standalone device that can perform one or many functions and has a mechanism to connect to the internet. The Internet, of course, enables the end-user (whether an individual or an organization) to connect with the “Things.”
Being able to connect to the Internet is the first of three abilities shared by all IoT devices. In addition, they all must have the ability to sense conditions about their environment—conditions such as motion, location, temperature, pressure—that together provide an organization with an almost unlimited number of capabilities. All IoT devices also must have the ability to record and respond to these conditions. The combination of these three abilities makes these devices incredibly useful for businesses.
The value received from today’s rapidly evolving technologies comes from the ability to manage millions of connected devices, to apply machine learning and AI tools to massive data sets, and to manage a platform with hundreds of thousands of nodes. Organizations must be aware that these technologies will be outdated in about three years.
—Suketu Gandhi and Mohit Mohal
So the Internet of Things is 1) the Internet, which enables the end-user (whether an individual or an organization) to connect to any number of devices also on the Internet, and 2) devices that sense, respond, and connect to the Internet and the environment to provide information to a person, device, or machine.
The Internet of Things offers organizations a massive potential value because they now can install inexpensive sensors into almost every product or service to get any kind of information they can dream of using. The number and type of applications with this information are expanding rapidly. For example, a fruit company now can track the temperature inside each container of bananas shipped from Costa Rica to customer stores in the United States, making sure the temperature never drops below the level at which ripening is affected. And on the leading edge of research, a researcher has designed paper—yes, physical paper—with a complete chip printed on it. With this paper, a newspaper reader can change a graphic, the text, or an ad with just a touch, for example. Many other applications for this connected paper are in the works.
But before an organization can achieve the promise offered by the Internet of Things, its business and technology leaders need to overcome some key challenges.
For business leaders, the three key challenges are:
Changes in how we consume data. These changes are leading to significant business decisions about how to deal with the large amounts of information being generated. While in the past an organization may have had 100 data points about a product built and shipped to the end-user, it now may have to deal with 100,000 or more data points, and must process this information in real time. And it must be able to determine what information is valuable and for which business unit, and ensure that this entity has the abilities to separate the signal from the noise and to act on the signal.
New organization skills and capabilities. The organization must make huge investments in acquiring and developing a new breed of skills (such as those of data scientists) to be able to find new ways to monetize data, process large amounts of information, and separate the true signal from the noise. It also must invest in leadership capabilities (such as those of the Chief Data Officer) to effectively drive the new talent. Few organizations today have either these skills or capabilities.
Organizational silos vs. an outcome-based view. Connected devices and new ways of delivering products and services require departments (sales, marketing, supply chain, and others) to work as one team, not as siloed functions. They also require organizations to develop a bi-modal view of their operations, which will let them maintain a traditional well-defined approach for delivering the same type of product or service over and over again, as well as establish a new, highly fluid approach to doing things that is constantly changing.
While business leaders struggle with these challenges, technology leaders need to overcome their own set of challenges with IoT:
A new breed of technology platforms. Organizations need to process massive amounts of information with the right machine learning in place. These platforms will not be centralized. Instead, they will be distributed across the organization and connected on a dynamic basis with the entire organization and its whole ecosystem of suppliers and customers. They will have the capability to process massive amounts of information in real time, capture both strong and weak signals, separate out the noise, and enable the organization to rapidly co-create products and services with suppliers, rather than building them in-house.
New set of organizational skills and capabilities. IoT will require a huge investment to acquire and build a new breed of technology skills—skills for maintaining data and network security; for taking advantage of the cloud and other available technologies; for building out massive, highly distributed platforms; for gathering information, processing it, and making it consumable by business leaders; and for understanding the overall business.
A scenario-based approach for platform solutions. In this world, there will be no ready-made tools that do everything the organization needs. So, it will have to decide which parts of the platform are necessary now and which ones are flexible—giving it the option to anchor the platform on the parts now needed and to scale it for the future.
Three-year lifespan for IoT technology investments—at best. The value received from today’s rapidly evolving technologies comes from the ability to manage millions of connected devices, to apply machine learning and AI tools to massive data sets, and to manage a platform with hundreds of thousands of nodes. Organizations must be aware that these technologies will be outdated in about three years. Knowing this, they need to absolutely adjust how they build, deploy, and extract value from these technologies—using an approach developed especially for this time frame (for example, no more than three years) and, therefore, different from the traditional technology investment lifecycle.
A Straightforward and Pragmatic Approach
The Internet of Things should not be viewed as a massive, enterprise-changing effort that if not done right the first time would bring the organization to its knees. Instead, it should be approached as a series of small projects, each involving a handful of products or services that have the potential to increase revenue or improve the bottom line.
These products and services have the potential for success, but that doesn’t mean they will succeed. The reality is that about half of them will fail. So, they should be initiated with the understanding that failure is a necessary option.
An approach to IoT that works best is to pick only three existing products and services (the number could be slightly more or less, but three is a good starting point) to which adding sensors and connecting them to the Internet could possibly result in a substantial improvement to the organization’s bottom line. At the same time, the organization will want to find three (or any number, as long as it equals that of the existing products and services selected) additional new connected products and services that could possibly lead to additional sources of revenue that improve the organization’s top line.
Research shows that from this portfolio of six products and services, one will be a massive success, two will be medium hits, and three will be failures.
The organization will move forward with the implementation of the three successful products and services.
This approach to IoT is simple and easily managed. And since it is not trying to change the entire business all at once, it causes little, if any, fear of betting the organization’s entire future. It is only the introduction of a few connected products and services. If they succeed, they will become part of the organization’s offerings. If they don’t succeed, they will be discarded, and others will be chosen to replace them. Then the process will be repeated.
To reduce their fear of the Internet of Things, executives will want to implement this straightforward approach to getting started with IoT projects; they will want to understand the challenges business and technology leaders must overcome; and they will want to work with a simple and clear definition of IoT. Doing these three things will demystify IoT and lead to a stronger and brighter future.
Suketu Gandhi is a partner in the global digital transformation practice of the management consulting firm A.T. Kearney. He can be reached at [email protected]. Mohit Mohal is a Chicago based Principal in the company’s Digital Transformation Practice. He can be reached at [email protected]