The Internet of Things will bring huge changes to the way markets and businesses work — and it could get messy.

The potential of the Internet of Things is fueling a lot of interest (and hype) all across media and industry. But we aren’t ready.

We are attracted to, and ready for, the insights that will likely come. But being ready for the benefits isn’t the same as being ready for the associated changes. Before the smoldering ingredients of IoT catch fire, preparation for the coming market power shifts, increasing complexity, pervasive security, and process change would help most organizations make the most of the IoT potential.

Yes, the potential insights from IoT are enticing. For example, it’s fun to think about the potential personal and even societal benefits from self-driving cars, such as fewer accidents, no problems with parking, more productivity while traveling, car sharing, greater infrastructure efficiency, etc. But perhaps a more profound implication is the data that they can collect. These cars will also be widely distributed “things,” gathering performance data that can help manufacturers diagnose problems, operational data that can help mechanics prevent failures, driver data that can help insurers understand risk, road data that can help cities improve infrastructure, etc. These kinds of insights, we’re ready for.

But there are a lot more changes coming with the IoT transformation than many people may recognize.

In the classic triangle, fire requires heat, oxygen, and fuel; without all three, fire isn’t possible. By analogy, analytics required data, technologies, and knowledge to be possible. About a decade ago, advances in information technology converged to fuel a boom in corporate use of analytics. First, widespread implementation of information systems captured unprecedented amount of data in ways that could be used in isolation or combined. Second, tools and technologies allowed the inexpensive storage and processing. Third, savvy analytical innovators creatively combined these to show everyone else what could be done.

Now, a similar convergence is coming with the Internet of Things. First, the cost and physical size of sensor technology have dropped such that they can be incorporated into most items. Second, widespread communications infrastructure is in place to allow these distributed components to coordinate. Third, once again, savvy innovators are showing the rest of us the possibilities from the data they collect. With these in place, the smoldering potential of IoT may be ready to catch.

But are we ready for the whole package? Probably not — because IoT is likely to be associated with substantial changes such as:

  • Market Power: IoT should provide a greater amount and a greater value of data, but are companies ready to align their interests in obtaining value from this data with the multiple other companies and end users who create, own, and service the products that originate the data? In the driverless car example, it is easy to see how multiple stakeholders could make use of the data from cars; the same is true for other devices. But it may not be clear who owns what data and how it can be used. At an extreme, the value from data could change even the directionality of payment — e.g., rather than consumers buying light bulbs, data value could cause manufacturers to bid for the right to put IoT-enabled light bulbs in consumer homes. A boon in data value might cause rifts among those with a stake in its benefits.
  • Complexity: Few organizations are prepared to be hardware and software development companies. But that’s what the Internet of Things will enable. As products are built with embedded sensors, the component mix increases in complexity. As a result, manufacturing systems and supply chains will become more elaborate. Software embedded in products will need to be updateable when the inevitable shortcomings are found. For example, long after the discovery of the Heartbleed error in a basic software component widely used by devices to communicate over the Internet, numerous devices remain uncorrected. Furthermore, this updating will create a complex assortment of versions to support. Companies will have the added complication of having to become de facto hardware and software companies in addition to their existing complexity.
  • Security: If we believe data is valuable, then we need to be ready for people to want to take it from us — why would data be any different than any other precious item? The IoT context intensifies the need for security requirements; for example, sensors or software that allow physical control of the product make attacks easier. We’ve already seen examples ranging from wind turbines that unauthorized users can control to ship data recorders that can be tampered with to adjust historical logs, even to Barbie dolls that allow attackers to overhear conversations, security problems spread as quickly as IoT devices. But beyond these, more insidious attacks might be ones that we don’t notice, as poisoned data streams may be difficult to discern with the volume of data that IoT devices produce.
  • Process Changes: Many business processes continue to be “pull” oriented. Information is gathered, then analyzed, then decisions are made. This works when change is slow. But with the IoT transition, data will stream in constantly, defying routine reporting and normal working hours. Flooding data from IoT devices will give opportunities for quick reaction, but only if organizations can develop the capacity needed to take advantage of it. Few mainstream large companies are ready for this, much less small- to medium-sized companies that lack the resources of their larger corporate brethren.

The good news is that by recognizing each of these challenges, organizations can begin the possible, albeit difficult, process of getting ready. Before considering IoT devices to collect data, organizations can clarify ownership and governance. Before designing IoT devices, organizations can decide if they should invest so that development becomes a differentiating competency or work with specialty organizations. Before deploying IoT devices, organizations can design in security and update processes. Before installing IoT devices, organizations can design processes to build on the new information. “Before” is the key — it will be hard to get ready once the IoT fire is spreading.

2 Comments On: Ready or Not, Here IoT Comes

  • Michael Elling | January 18, 2016

    As the internet or IP stack does not include any inherent internetwork settlement models between the horizontal layers and vertical boundary points, we should shy away from calling it “internet” and instead focus on the “world of things” WoT which would focus on settlement systems the provide important price signals and (dis)incentives. These would reduce the need for data sharing and mining and focus more on clearing supply and demand more effectively by directly relating the commercial value of a session to its network or communication cost.

    This approach runs counter to the settlement free or bill and keep model that has fostered and sustained today’s vertically integrated monopolies at the core and edge.

  • christian | January 28, 2016

    And marketing!

    See: Jamshed Dubash’s “Marketing and the Internet of Things: Are You Ready?”

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