Is the business world ready for the internet of things?
The internet of things (IoT) is one of the core foundations of the digital transformation that is happening all around us. Yet, it may be too soon to predict the trajectory of that transformation because current business models are becoming obsolete — and their successors haven’t yet been fully invented.
Innovative solutions and adaptations of technology are driving organizations and processes forward and creating ever-more value for businesses and society. Organizations can simplify, optimize and change how they work — and can get much deeper insight using proper tools and advanced technology. Applying all this with the enormous intellectual potential of start-ups is creating a new digital reality.
Digitalization is changing lifestyles, how organizations do business and the commercial attitudes of customers. Today, organizations need to be agile and adjust to the needs of customers, which can change almost overnight.
IoT technology is possibly the biggest disruptor to business and society that we will experience in our lifetime. For the modern economy, the IoT is like gravity for the universe, constantly accelerating growth — and overstretching today’s business models.
New business models are needed
Every day, there are more and more examples of how organizations could harness some of the potential of the IoT. There are hundreds of ideas emerging as start-ups or proof of concept, using computing power and sensors that are available today almost for free, giving the potential to do what was unimaginable only a couple of years ago.
But, that is only the technology arm of the digital revolution. Now what is needed are ideas to find ways to commercialize applications of IoT technology — but there is a lack of sound business models to do this.
Organizations face the challenge of offering a product or service utilizing IoT technology that people will actually buy and, critically, have the expected impact on business. For example, a wearable device that measures your blood pressure is really only a toy unless it becomes a crucial element of the patient-centric ecosystem.
Today, there are a few innovators using IoT technology in dramatic new ways — for example, online retailers using drones to deliver small packages. What is currently missing is a large volume of bold and bright ideas that can succeed.
Retrospectively, the iPod was arguably the first IoT-driven model — it had a big impact at the time, ushering in the digital music age, but now the iPod’s legacy is just slightly smarter mobile devices. Napster started the streaming music revolution, with peer-to-peer file sharing providing an early model of IoT-type connectivity — but its legacy was the expectation that music should always be available for free. This is where the old and the new IoT-enabled models meet but fail to correspond.
Revolutions don’t always happen overnight
It’s generally accepted that the IoT is a big part of the future. For organizations, the goal is to figure out how to get there, and what it will look like — but it may be some time before they know that future has really arrived.
Decades ago, RFID chips were heralded as a revolutionary innovation in supply chain, but without the networking capabilities (i.e., the internet) that came along coincidentally, there was no great benefit to that technology. This could be a parallel to today with the IoT — only by combining IoT technology with a business-driven application of new technologies will the revolution happen.
Some industries will become digitalized quite quickly, while others will need more time. But even industries that rely on heavy physical assets, such as oil and gas, will change, thanks to the ability to collect data from these assets and analyze it for performance improvement purposes.
And, because organizations exist today in a cyber-physical world, digitalization will happen in an interactive way: objects that were previously silent, waiting to be simply turned off or on, will soon be talking to us about their capabilities and findings. And with the right analytics, organizations will be able to hear machines talking, resulting in enormous change — including business models.
Movement in unexpected directions
Today’s disruptors will, in the future, be vulnerable to disruption themselves. For example, more and more consumers are tending toward business models on the basis of sharing platforms. In this model, there is the consumer, the broker that provides the software platform and the person who owns the assets in order to provide the service.
In the very near future, the asset owner will be able to use sensors and apply complex data modeling and analytics at scale to drive down costs and, if achieved on large-scale operations, compete with or ultimately defeat the broker.
This is an example of how IoT technologies could overturn the traditional — and what are today perceived to be innovative — ways of doing business. The economy is changing quickly: making something is not enough, it has to be connected. Smartness and connectivity will be the watchwords of the near future.
Today, the IoT can enable predictive maintenance and live status alerts direct from machines — but to go beyond this, requires a radical change of business model. Imagine a future where every piece of technology or electronic equipment identifies itself and not only has data to talk about, but talks to the others about that data, and applies artificial intelligence to figure out new ways of working with each other.
That’s the industrial landscape of the future. Meanwhile, consumers are desperate to escape all this connectivity and digital exposure, so the IoT becomes a drug — humans escape the digitalized world around them into an alternative virtual reality to be immersed in calming digital environments, whether solitary or virtually shared.
Organizations are not ready to go there yet. But, they need to get ready now, because the journey has still to be plotted. One of the underestimated benefits of IoT is its capability to perform environmental monitoring: by putting sensors in the natural environment, we might be much better able to predict how to protect the earth. That would represent not just new business models, but a new model of being human and result in a more positive legacy than many could imagine today.
This article is based on a recent game changers radio episode, SAP’s internet radio show