The “Internet of Things” (IoT) has rapidly become one of the most familiar (and perhaps, most hyped) expression across business and technology. Gartner forecasts tremendous benefits resulting from the IoT, but the ways in which enterprises can actualize any benefits will be diverse and in some cases, painful.
Currently, IoT technology — and business models that utilize IoT — are immature, with a minority of enterprises experimenting with the technology. Despite this immaturity, we can already see existing and planned uses across a wide range of industries, best described as scattered pockets of growth rather than a cohesive market development. Enterprises will need to make plans and preparations now or risk being left behind by their faster moving competitors.
Recent headlines demonstrate how momentum is growing around the IoT:
- Major acquisitions by large technology platform firms like Google, Apple and Samsung to explore the connected home, connected health and the connected car segments. Google’s acquisition of Nest Labs for $3.2 billion is an example of this activity.
- There is a concerted push by operational technology firms to explore investments in the software domain. Firms like GE, Siemens and Schneider Electric have all made organic investments or explored opportunistic acquisitions. Related announcements of the expanding partner ecosystem in the form of the Industrial Internet Consortium (IIC) support this move.
- Prominent geographic expansion of machine-to-machine (M2M) communication operations such as Telefónica’s $1.5 billion deal (over 15 years) to connect parts of the U.K. smart grid.
The IoT Will Enable Digital Business
The Internet of Things is a key enabling technology for digital businesses. Enterprises that will rely heavily on merging the physical and digital worlds must master the Internet of Things. By leveraging the IoT, enterprises will be presented with a wide range of opportunities that will result in significant benefits such as:
- Enhancements to overall business model: Including cost structure, channels and the timing of revenue streams.
- Increased operating efficiency: More effective monitoring, control and utilization of assets.
Greater focus on outcome: Rather than selling an asset, a firm may sell an end outcome instead. This may involve switching to pay-per-use delivery mechanisms.
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