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The Internet of Things (IoT) is still mired in a tug-of-war between robust demand and the ongoing chip crisis. Despite semiconductor shortages and other headwinds such as supply chain issues, political rumbles and regular COVID-19 flare-ups, the number of connected IoT devices is projected to reach 14.4 billion this year and 27 billion in 2025.
The fact that soon everything possible can be connected to every other thing and to every person with an online device will lead to profound behavioral changes. With 97 percent ownership, cell phone coverage in the United States is nearly universal. 85 percent of Americans have a smartphone, 77 percent have some kind of computer, and more than 50 percent use a tablet. 31 percent of Americans are “constantly online.” More and more homes in the US are using automation solutions, from smart security and lighting systems to cleaning robots, water sensors and even egg counters. This hyper-connectedness drives new lifestyles, expectations, attitudes and behaviors among American consumers.
An overwhelming step to online transactions
62 percent of Americans shopping online regularly, i.e. more than once a month. But even shoppers in the store rather evaluate products and prices online before making a purchase. COVID-19 drove a dramatic, sustained increase in online sales in some segments, the best example being food sales. It has further boosted the adoption of digital payments as even offline shoppers have moved to contactless methods in the interest of health and safety.
Engagement immersed in digital
Intelligent devices are not only enabling people to interact with the IoT, they are transforming the way people do it. According to estimates about one in three Americans uses voice commands to search the web or make a purchase. There is also a steady growth in the use of touchless sensing and gesture recognition to interact with devices for a variety of purposes – from driving automotive interfaces to operating medical devices. Mixed reality devices allow surgeons in different locations to collaborate, employers to onboard and train employees, and players to immerse themselves in fantastic games. As a burgeoning IoT fuels the growth of the metaverse, other categories of engagement will become immersive as well.
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Consumer expectations are skyrocketing
The rapid adoption of IoT creates limitless opportunities for businesses. But it also adds pressure. Consumers are willing to connect more and be more engaged, but on their own terms: they remain loyal to a provider as long as it responds immediately; they expect consistent service and seamless information flow across physical and digital channels; they expect contextualized experiences and hyperpersonalization; and they are more concerned than ever about data security and privacy.
IoT helps disintermediation by connecting enterprises directly to end users. This means that while there is a huge potential for success in the IoT, it is by no means guaranteed. Enterprises need to meet their customers’ expectations for experience and engagement, while addressing their IoT-related issues. They will need to consider various aspects, from the business model and technology platform to organizational change, talent resources and appropriate use cases, to respond to new consumer behavior and extract value from the IoT.
Build an IoT-ready organization
Enterprises need to self-organize to drive digital strategy in their business through IoT at its core. As IoT extends across business, functional and hierarchical lines in an enterprise, it can be difficult to say who owns it. If an organization does not clearly allocate ownership of the IoT, good results are unlikely to be achieved. To avoid fragmented decision-making, duplication of effort and investment, and vulnerability to breaches, it is imperative to identify the person or people in the organization responsible for facilitating, managing and directing the use of IoT.
This means that the organization must have the right people for the job. In addition to recruiting data scientists and other IoT tech talent, enterprises must assemble a mix of enterprise, cybersecurity, and risk management teams that can translate consumer expectations into seamless, secure experiences. In addition to human resources, IoT readiness can require various changes in the organization, just like any other business transformation program. For example, it may require the company’s business model, workflows, or key processes to be redesigned to work in and with the IoT.
Scaling IoT to unlock business value
The odd implementation is not enough to scale the value of the IoT. Instead, enterprises should use the technology as a strategic tool to empower various business opportunities. These range from using sensors and connected equipment to optimize service operations, to designing and delivering new products and services, to improving understanding of manufacturing and supply chain operations, to inspiring new business models.
IoT is already impacting specific areas
Manufacturing is no stranger to automation; however, the IoT enables even the most advanced manufacturing systems to improve their performance. By deploying sensors throughout their operations, manufacturers can keep their production systems functioning coherently, responding faster or even self-remedial in the event of a failure. Enterprises could even make their production systems accessible to authorized third-party entities, such as suppliers, to improve inventory operations, or equipment suppliers, to enable remote monitoring and maintenance. Manufacturing has brownfields with existing assets and investments. Maximizing these investments while driving transformation should be one of the key areas of focus.
A universally applicable – and just as underused – opportunity of IoT is data monetization. As billions of devices participate in the IoT every year, they bring with them a wealth of information. Companies need to think seriously about unlocking this value. The most obvious way is to build a marketplace, build an ecosystem of partners, and leverage the data streams to enrich the business proposition. Data can be shared with both internal and external stakeholders using trusted blockchain.
Unsurprisingly, Amazon is a prime example: the company uses data from Alexa to sell products to customers; it also charges third-party providers and developers for the privilege of building and launching services on its platform. Another example is the digital marketplace for electric vehicles, which monetizes its data by offering it to related companies. For example, it provides customer and market data to charging station operators, who use that insights in their pricing strategy. Companies can provide ‘as-a-service’ models based on insights from their product usage.
Technology that is scalable and secure
Handling the connections and data of the IoT will likely require some changes to an enterprise’s business model. The hardware must be able to generate and process data, which together with data from external devices must be converted into insights and integrated into business processes and workflows. The challenge with IoT can be the amount of data, some of which is irrelevant. Therefore, a hybrid edge and cloud architecture would be needed while embracing IoT.
Since the IoT is not one homogeneous entity, enterprises will face fragmented ecosystems, impacting their ability to implement and scale IoT initiatives. Therefore, they should specify interoperability as a criterion when purchasing IoT solutions. Companies that are able to integrate these disparate ecosystems and innovate with emerging technologies such as blockchain, AR/VR, etc. will be able to extract value from IoT.
Ultimately, an enterprise network will have millions of IoT endpoints, making it a major challenge to protect the organization and its customers and partners from cybercrime. Customers know this and are concerned. Unfortunately, studies show that despite companies recognizing the importance of cybersecurity, it is not prioritized. That has to change. Enterprises should focus on holistic security that includes privacy, data sovereignty, regulatory compliance and traceability.
Leaders need to view security in strategic terms, taking into account their business model, industry-specific characteristics, and even monetization opportunities. Product manufacturers must build security into their production lifecycle. And even as they “make security of everyone,” companies must allocate clear responsibility and accountability for IoT security across the organization and also across extended networks, such as supply chains. Particularly in manufacturing, where IT-OT integration opens up the production network to the Internet, having a zero-trust security design is critical.
The potential value of IoT is unfathomable, but estimates say it could add between: $5.5 trillion and $12.5 trillion by 2030. Consumers are adopting IoT at lightning speed and are changing in the process. Companies that have not quite succeeded in extracting value from the IoT need to ensure that the behavior and expectations of the IoT consumer are factored into their plans. This will likely require initiatives at an organizational, business and technology level.
Gopikrishnan “Gopik” Konnanath is SVP and global head of engineering services and blockchain at Infosys
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