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Are You Prepared for the Connected World of IoT?

How a World of 50 Billion Connected Devices Will Affect Businesses

October 31, 2017, Marko Keskinen

If you thought that the proliferation of smartphones and social media apps with all their cultural and societal impact is a big thing - you ain't seen nothing yet. The digitisation of the global economy has just begun. The Internet of Things (IoT) represents the fourth industrial revolution, and perhaps the most significant one so far.

This revolution is based on smart connected products, “connecting everything,” and made possible by rapid advancements in processing power, software, sensors, data storage, microprocessors and wireless connectivity. According to a Cisco estimate, there will be 50 billion connected objects (things) in 2020—that is, “more than 6 things online” per person.

To put (the internet of) things into perspective, Industry 1.0 started in the 1780s and was driven by mechanisation and steam power. Industry 2.0 started around 1870, driven by mass production and electrical power. It was followed by Industry 3.0, from the late 1960s, and driven by automation and electronics. And we’ve already entered Industry 4.0, characterised by cyber-physical systems, networks and IoT. With pervasive connectivity, coupled with fast developments in artificial intelligence, both technical and cultural evolution are likely to become even more interesting going forward.

IoT is big business

In monetary terms, B2B spending on IoT technologies, apps and solutions will reach €250 billion by 2020. Between 2015 and 2020, BCG predicts that revenue from all layers of the IoT technology stack (software, connectivity, cloud, apps) will attain at least a 20% compound annual growth rate.

By 2020, 50% of IoT spending will be driven by discrete manufacturing, transportation and logistics, and utilities. Predictive maintenance, self-optimising production, and automated inventory management are the top three use cases driving IoT market growth through 2020.

Thinking differently about strategy/business

However, there is more to the IoT evolution than evolving technologies and growing numbers. IoT implies a systemic change that requires a new mindset and a higher clock-speed. In business terms, both value creation and value capture will be different. For example, not only current but also emergent customer needs must be addressed in real time, in a proactive way. This is very different from the 'old skool' way of conducting market research and reacting to current, observed customer needs (most often too late).

Also, it is no longer enough to develop, make and sell standalone products that become obsolete with time. People and businesses expect product refreshes through over-the-air updates, with minimal disruption and hassle. This is recurring revenue instead of (or in addition to) point transactions where you sell the next product or service, one at a time.

Thinking in terms of business systems

On a business system level, the increasing capabilities of smart, connected products expand and reshape industry boundaries. Intelligent, connected devices and sensors comprise a system of systems. For example, a tractor company is likely to be competing in a broader farm automation industry, instead of “just making tractors.” And industrial companies providing manufacturing and utilities solutions are developing wireless connectivity and data acquisition in their product portfolios, to enable higher asset efficiency and new services to their customers. ABB, GE, Ponsse and Siemens are good examples of this, to name just a few. Some of these companies aim at becoming platforms themselves, offering an intercloud platform also to other companies.

Hence industries and businesses need to be understood and managed on system level. It is no longer sufficient to manage your own (company) resources and processes, but it is critical to understand and appreciate other players' business logic and priorities. To find and trigger complementary partnerships, for instance, as very few companies have the muscle and competencies necessary to provide scalable full-stack IoT platforms and services. Practical solutions based on scalable technologies are needed to enable the massive yet controlled data flow and true industrial asset efficiency.

The technology accelerating the evolution

Data is the new oil. However, it is useful and valuable only when available from multiple connected sources, 24/7, and enriched by data analytics, allowing for the monitoring, control, optimisation, and finally, full automation of the assets.

Narrowband IoT (NB-IoT) is an essential new technology to make the network for the tens of billions of connected devices and sensors. It has the reliability, scalability and security inherited from the cellular (mobile) technologies. Thus, it can provide the horizontal layers of connectivity and sensors for all industry-specific (vertical) parts of the IoT architecture. In other words, a manufacturing facility, a power plant and a logistics centre all benefit from NB-IoT for controlled connectivity in their systems. Even though their business models and related data analytics and applications requirements are very different from each other.

“Connectivity changes the nature of an object.”

The quote above, from the book The Seventh Sense by Joshua Cooper Ramo, captures the systemic change and its magnitude. Smart, connected products are reshaping industry boundaries and creating new business opportunities and totally new industries. As a result of the IoT evolution, new business models are emerging also in telecommunications space, traditionally a relatively conservative and slow industry. Networks and platforms based on software and services are likely to reign going forward. They are attracting the biggest investment and profit pools, and they are outperforming other sectors. How are they going to affect your company and your job? Are you actively preparing for these changes?



Marko Keskinen is a Senior Advisor at Aalto University, Finland. He also consults companies and other organisations on strategic foresight, business development and technology commercialisation/go-to-market. He has over 20 years’ experience in global technology businesses, including Nokia and software/cloud service business. Visit his LinkedIn.

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