Why the value in IoT is not in the “Internet” or the “Things”?


writer icon Victor Zanabria     Jeff Ferrb   |   Tech     🕐 05. Feb. 2018

Internet of Things value is not in the “Internet” or the “Things”, but it is in the data and insights that can be generated because of having different networks of devices. According to the Ericsson Mobility Report, by the year 2022 there will be around 29 billion connected devices of which around 18 billion will be related to IoT. But these numbers are just the tip of the iceberg. There is something that needs to be highlighted which is the outcome of the interaction of these components: data and insights, which are the two main topics of this article.

When it comes to the data generated by IoT devices, we are talking about a huge amount of information that can be used to generate insights about consumers’ preferences. By 2022, the world mobile data traffic per month will be at around 71 EB: nearly eight times higher than the numbers recorded in 2016. However, it seems like many organisations have not explored this environment and consequently have not realised the advantages that this can bring. According to McKinsey Global Institute, most of IoT data collected is unused. From this, it can be concluded that there is and there will be an important source of value not yet exploited. In this scenario it is crucial for organisations to consider two aspects: The first one is having a well-defined insight about what can be done with all the data that has been gathered. The second one is to recognise who are the key players that will help them to gain competitive advantage over their competitors.

According to the first aspect, it is important to consider that there is no value in IoT devices if there is not an engine behind it that utilise the generated data. The idea is to get meaningful information that allows organisations to provide more value for their customers. This can be seen in the work Google have done with its nest thermostat. This device gathers data from different sources like the actual temperature, the peaks of electricity use, the presence of people, the costs of electricity during the day, among others. All this information is combined with the user preferences which comes from a collection of historical data (temperature records set up by the user). As a result, the thermostat learns about user preferences which mixed with the variables previously mentioned, allows to set up and “ideal” temperature for the user. This case reveals how it is possible to take advantage of the data collected to give customers an extra value.

The second aspect is about recognising the key players in the IoT environment. In this article I would like to point out a key element for creating value and defend the business against competitors. I am talking about the community of software developers which often goes unnoticed. Rogers refers to developers as a fundamental element in the process of value creation in the business of IoT. They are the ones that are going to oversee the expansion of the company’s ecosystem. This is largely because developers will provide useful third-party apps with innumerable functionalities that will add value for the final user. An illustration of this can be seen in the work that Apple have done by creating an ecosystem of developers that adds value and defend its organisation. With more than a million apps available, Apple have created an attractive platform for users, which at the same time motivates developers to keep creating more apps because of an attractive market of users. This is a cycle called network effect which provides a strong defence for Apple’s business and creates value at the same time.

All in all, IoT should not be considered as an isolated technology, but an environment made up of different components. For this reason, companies that are going to get immersed in the business of IoT, must be aware that devices are just one tiny part of the complete world that IoT embraces. Here it is important that the enterprise units participate in cooperation with the IT department to define what information can be useful for the business and clients. The second thing to consider is that business and networking are not independent fields anymore. Therefore, organisations need to create an ecosystem that helps them to create more value and to defend their businesses. Here it is relevant to acknowledge the role of developers and the importance to attract and convince them to participate during the value creation process.

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