Competing With Data & Analytics
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Despite considerable interest in the Internet of Things, many organizations do not yet have an active IoT project. Our recent research report, “Data Sharing and Analytics Drive Success With IoT,” finds that 60% of the organizations responding to our global survey do not yet have an active IoT project.
But that means that 40% of the organizations surveyed are incorporating IoT into their business model. What are some ways that they get started?
They Keep Initial Scope Small
Initial forays into the IoT are often small experiments: Companies choose an application that requires a limited investment and a relatively small number of IoT devices. For example, the Array of Things is “an urban sensing project, a network of interactive, modular sensor boxes that will be installed around Chicago to collect real-time data on the city’s environment, infrastructure, and activity for research and public use.”1 Because of the difficulty of accessing the IoT-connected devices after installation, the reliability of the network is paramount. Charlie Catlett, director of the Urban Center for Computation and Data and the head of the Array of Things project, told us that one of the key reasons for their slow, phased rollout of the sensor nodes was to get comprehensive data on the reliability of a node before installing the remainder. With their phased plan, they were able to test the nodes for things like weatherproofing and reliability before proceeding with a full installation.
But in IoT, scope has an additional dimension. Embarking on an IoT project means more than managing devices — it means managing new and deeper relationships with suppliers, customers, and even competitors. Many of the organizations in our study began with projects that involved a small number of stakeholders and thus required less coordination and collaboration with outside organizations.
The result of such an approach is that future phases aren’t saddled with large compatibility requirements from the first phase. Low investments mean lower sunk costs for replacement (if necessary). And fewer relationships mean fewer affected systems in other organizations.
They Think About Short- and Long-Term Value of IoT
Several of the executives we interviewed for the report recommended developing specific use cases in which IoT would benefit the organization, and then computing the organization’s overall ROI from those results. Many of the benefits of IoT are quantifiable. Survey respondents reported a variety of ways to measure benefits, such as a great or moderate extent of higher manufacturing or harvest yields (15%), enhanced supply chain accuracy or delivery (20%), increased revenues (23%), or reduced crime and fraud (16%). Each of these lend themselves well to measurement.
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But that doesn’t mean that only immediate-term benefits matter: Some companies undertake a small-scale IoT project to gain experience for more complex future projects, since much is learned by doing an IoT project that is difficult to learn from any other activity. Some large Fortune 500 companies work with the Array of Things smart city project in order to gain experience with the deployment of real-world IoT projects.
What’s more, once the initial project is underway, organizations often then discover other applications for the data generated by IoT devices. Daniel Cooley, senior vice president and general manager of IoT products at Austin, Texas-based Silicon Labs Inc., observes this with his interactions with clients. “The really interesting thing about the IoT,” he says, “is that someone puts this wireless technology in place for a reason and then they find different things to do with that data. They very quickly become data stars.”
They Consider Alternatives
For IoT projects to be successful, executives we interviewed reiterated that there must be a clear return on investment for the project, a need for the data provided, and no better way to get it.
Sixty-four percent of respondents actively working on IoT projects believe that they can’t get the benefits of IoT without IoT. The genesis of the smart city Chicago Array of Things project was not a desire to use IoT, but a desire by the Urban Center for Computation and Data to use data to address research questions about municipal issues. The center’s researchers found that data for some of the factors they wanted to study were not available: To investigate the rates of asthma in certain neighborhoods, for example, they wanted data on congestion and traffic at the neighborhood level. Internet-connected sensors mounted in neighborhoods subsequently became the best way to get reliable data at the necessary level of granularity. But the IoT approach wasn’t their first thought; they investigated other options before concluding that the IoT sensors were the best way to get the data they needed.
In addition to these observations about how companies get started in IoT, our study reports on several findings including:
- Organizations with strong analytics capabilities are three times more likely to get value from IoT than those with weaker analytics capabilities.
- The connections in IoT are not just between devices but also between organizations, necessitating managerial attention to the resulting relationships, not just technical attention to the devices themselves.
- Connections from IoT create interdependence not only with customers and suppliers, but also with competitors and public agencies.
- IT projects typically benefit from large economies of scale, as variable costs for additional users are minor, but with IoT, diseconomies of scale can dominate economies of scale. Costs can increase more quickly than the growth of the device network.
- IoT requires individually complex foundations — such as analytics and technical infrastructure — and then intensifies this complexity.
- This complexity is dual-edged, offering opportunity to those who develop competencies quickly.
IoT is difficult, but these difficulties also create opportunities for organizations that commit the time and resources upfront. Organizations that want to get started can learn from those that already have projects underway.
1. Array of Things Project. Frequently Asked Questions, 2016. https://arrayofthings.github.io/faq.html