For years, supporters of the Internet of Things have claimed that the technology would transform business. Real-time information gleaned from sensors attached to cars, buildings, pipelines, cell towers, and other staples of the modern economy was supposed to provide companies with valuable insights to improve operations, spark innovation, and identify new revenue sources.
Until recently the hype has mostly fallen short of reality. But due to ultrafast 5G broadband connections, advances in artificial intelligence and predictive analytics, and the emergence of cloud technology that can directly integrate IoT data into workflows, companies are extracting greater value from their data and putting it to use.
For organizations in the process of a digital transformation, cloud-enabled IoT represents an opportunity for organizations to leverage a powerful new source of information.
Manufacturers can spot faulty products on assembly lines. Oil and gas firms, including Marathon Oil and Halliburton, are remotely monitoring their drilling and wellhead equipment and shutting down operations in an emergency. Retailers are using their new IoT powers to adjust staffing and product assortments based on customer traffic patterns.
“The Internet of Things is starting to benefit both consumers and companies,” says Burt Flickinger, managing director of Strategic Resources Group consulting firm in New York.
IoT expectations vs. impact
McKinsey estimates IoT will generate trillions of dollars in economic value by 2025. The number of industrial IoT sensors will more than double to 36.8 billion by 2025, according to a November 2020 report from Juniper Research.
But IoT’s execution doesn’t always live up to its promise. Nitin Seth, chief executive of Incedo, a digital transformation consulting firm, said companies for the most part have been struggling to convert their data into practical uses.
The bottleneck is the data itself.
“It’s fair to call out so far the real impact of IoT versus the investment hype,” Seth, a former top executive at Fidelity Investments, McKinsey, and Indian e-commerce giant FlipKart, told Workflow in a phone interview. “There is a big gap between the two. The general impact has been much lower than one has expected.”
IoT was a solution to a problem that companies hadn’t quite identified, he says, so businesses have been generating more data than they know what to do with.
“The bottleneck is not necessarily the technology,” Seth said. “The bottleneck is the data itself.”
Companies need to develop business use cases, specific problems to solve, and then work backwards to see how insights from the data can solve those problems, he says.
Manufacturers like Siemens and General Electric have heavily invested in IoT technologies designed to make their factories more efficient. The companies use data collected from cameras and other sensors throughout the factory floor to spot product defects on the assembly lines or determine which pieces of equipment will need repair or replacement.
At the start of the COVID-19 pandemic, oil and natural gas producers, like many companies, had to send workers home. To make up for fewer human eyes, producers used cameras and other sensors to remotely monitor drilling wells, rigs, and other sensitive equipment.
“IoT platforms for energy firms could feature real-time unsafe conditions alerts, emergency response, and early identification of potentially unsafe or environmentally threatening incidents,” according to a report by PwC.
But what companies ultimately need is a cloud platform to collect, analyze, and act upon that data, Seth says. The problem, he says, for many organizations is, “How do I bring the data together in a platform where I can make sense of it and do something about it?”
Redefining IoT’s last mile
In the past, companies were content to visualize the data they collected from their devices onto a dashboard, says Michael Fallon, ServiceNow’s senior director of IoT and Connected Operations.
The question, Fallon says, is what happens next?
Visualizing the data is not enough, he says. Companies need to redefine the last mile of IoT as taking action on the data to help their teams execute. Specifically, they need a platform to connect that data to services and actual workflows, and to solve problems that improve customer experiences, he says.
A European passenger train operator, for example, deployed sensors along the tracks of its most popular routes to alert the company to accidents or other mishaps.
ServiceNow developed systems to allow the train operator to automatically dispatch field staff, alert station and customer service agents about estimated delays, and calculate business impact to executives, including overtime staff hours, disrupted routes, and number of impacted customers.
Another example is a major theme park in Australia, for which ServiceNow created a system to monitor temperatures of cold-storage food and beverage containers across a sprawling geographic area.
Companies need to redefine the last mile of IoT as taking action on the data.
Using the Now Platform, the company developed a system that automatically collects data from sensors and triggers alerts if the container temperatures change to levels that make the food and drinks unsafe for people to consume.
Finding more revenue
While IoT data can help companies spot operational problems, the technology’s future opportunities lie in identifying new revenues, especially in retail, experts say.
Major retailers like Amazon, Target, CVS, and Kroeger are outfitting their physical stores with beacons and sensors that can track customer movements, says Flickinger of Strategic Resources.
“It’s in the early stages, but very relevant to retail because millennials and generations Y and Z are clearly on record that they don’t like to shop in certain sectors and categories and feel that stores are too big and a waste of time,” Flickinger says. “Retailers are using artificial intelligence and the Internet of Things to really optimize the shopping experience.”
For example, information from the IoT devices helps the retailers determine which products to stock and where to place them in the store, he says.
“The convenience store chains are putting their best sellers close to the front door or close to the register so people don’t have to walk to the back,” Flickinger says. “They could walk in, buy what he or she wants in terms of single-serve cold beverages, salted snacks, and candy, confection and gum, and possibly cigarettes, and get out quickly.”
The Vitamin Shoppe used IoT data to determine their peak hours of store traffic so they could ensure they had enough employees working during that period, according to a case study released by RetailNext, the startup that partnered with the chain to develop the system.
Vitamin Shoppe also used the data to adjust store hours, whether extending hours into late evenings or opening earlier on weekend mornings. The chain said it earned $6 million in additional revenue within seven months of deploying the technology.
IoT insights into action
The big lesson is that only gathering information is not sufficient; companies must use insights from the data to solve critical business problems. Only then can companies monetize the value from the data they spend so much time and effort collecting.