The consumer applications of Internet of Things (IoT) technology drives many peoples understanding. People equate IoT to the fridge that updates an online shopping list or the smart energy meter that shows electricity usage. These are useful ideas and might save a household some time and money. However, the real power of IoT is in the applications that solve real-world problems and can transform the business models of whole industries or the way that governments deliver public services.
The real action is in B2B uses or Industrial IoT, sometimes referred to as Industry 4.0. According to McKinsey, 70% of the market value of IoT, which they estimate could be worth up to $11.1 trillion by 2025, will come from B2B applications. The sectors expected to be the most prominent and fastest adopters of IoT technology are manufacturing, cities and health. It is in these areas IoT applications will unlock the most significant value.
There are three reasons why these are the sectors to watch. First, the power of IoT to transform business processes. Second, their ability to attract investment and, third, they are best-placed to take advantage of new business models that arise.
Looking at the impact of IoT on business processes, in factories, for example, predictive maintenance, where IoT technology can determine when machines will fail can save millions in lost production. A city can reduce congestion if it can use better insight and technology to manage traffic flows, or hospitals can lower the rate patients come back if it can monitor and react to them not taking their medicines as prescribed. These are all real-world problems in need of a solution.
There are already companies at work in these areas, beginning to develop and deploy innovative IoT technology. Where there is a definite market need, investment is more accessible. VCs like ourselves want to know there is a demand for a particular technology, and we will see a return on our investment. Along with providing finance, we can work with them to bring their products to market. However, to realise the value of IoT, companies need to embrace new business models.
For example, remote monitoring combined with IoT can enable new “anything-as-a-service” models. For instance, Norwegian IoT start-up CageEye’s technology remotely monitors salmon to provide insights into the way they feed and tell farmers when to feed them. By connecting the sensors to an automated feeding system, this will, for the first time, enable “feeding as a service” to increase yield and decrease cost.
To capture the benefits offered by IoT technology like that of CageEye requires leadership. Innovative technology and investment are not enough. The reality is that IoT could mean a revolutionary change in the way businesses and cities operate, and how Governments deliver vital public services like health. It needs leaders who are willing to understand the opportunity and the challenges and then work with others to implement it.
Success needs management to consider the opportunity now and, in the future, to unlock the value from IoT. They must look at the whole ecosystem of their organisation to see the complete picture of what is possible. There are some potential barriers to overcome: Once collected, how do you manage the data? For something like the National Health Service, there are privacy concerns that need to be understood. People need confidence that data is secure. Also, IoT may mean extra investment in IT infrastructure and networks. Many organisations and Governments have poor track records in IT projects which can make them cautious. Also, can companies be successfully led through a fundamental change in how they approach their business? Big organisations can be resistant to change.
The success of Industry 4.0 means getting the right actors around the table. It needs innovators to bring new ideas, policymakers who can empower innovation through ensuring the best infrastructure and legislation, investors to provide the fuel, and industry leaders who can implement and scale the solutions. The prize will be more efficient and more productive industries, cities and governments if we get it right.