The Stack Archive

Why early IoT adopters own the future of business

Tue 28 Jul 2015

matthew-smith-iot[1]Global head of market development for IoT at Cisco, Matthew Smith, discusses the impact that the internet of things will have on future business practice…

In 2008 the world passed through a tipping point, where the number of connected devices surpassed the number of people on the planet. Those nearly seven billion connections has more than doubled in the last six years to approaching sixteen billion connected devices. This number is very conservatively forecast to triple again in the next five years to around fifty billion connected devices, or “smart objects”.

This connectivity has given rise to the Internet of Everything (IoT), the networked connection of people, processes, data and things – the end of the ‘old’ internet and the re-birth of the new internet, with its ability to produce a broad and diverse set of what we should look at as our new “e-outcomes”. This ‘new internet’ is conservatively predicted to be at least five times as large as anything that has gone before.

These new ‘e-outcomes’ are going to be a result of our ability to harness data. The ease of creation and capture of data sources through digitisation has produced a fundamental challenge: how do we take this data, turn it into information and knowledge and through scenario planning, turning this knowledge into wisdom, and from that create economic value?

The potential of this ‘economic value’ has been conservatively calculated [PDF], from just 62 use cases, over the next ten years to be around $19 Trillion. This $19 Trillion is divided into $14.4tn in the Private Sector and $4.6 trillion in the public sector. This Economic Value will be created through a myriad of routes.

Within the Private Sector, the initial value creation will be centered around digitising the processes of today. Some of these, as we look at them are: better asset utilisation ($2.4tn); increased efficiency in supply chain logistics ($2.7tn); and increased customer experiences ($3.7tn).

In addition to digitising the processes of today, a large slice of the value from the Internet of Things is going to come through brand new innovation. This ‘disruptive innovation’ will likely take the form of new start-up companies, or breakout teams within large existing organisations that create technologies and applications to disrupt exisiting ways of doing business.

An example of this type of disruption is Uber. Started only a few years ago and with less than 1,000 employees and no real physical assets, Uber has grown to a market capital of $40bn – a sum greater than the market capitalisation of United Airlines and Hertz combined.

“If companies do not drive the culture of change towards digital across the whole organisation then they will be left with yesterday’s slow and ineffective decision-making processes”

If you have 9,000 driverless Uber taxis in New York City, the average wait time will be 38 seconds and the average fare fifty cents per mile. Given that driverless cars will be commonplace by 2025 and everywhere by 2030, this disruption will drive more than just annoyed taxi drivers.

In the Public Sector, mass urbanisation will be the fundamental generator of data. China is proposing to add a hundred cities of more than a million people in the next thirty years; India’s cities will grow by a staggering four hundred million people over the same period. This will make the need to be more efficient and, to do more with less, critical.

Already we are seeing the need for wi-fi mesh technology to be placed over cities to facilitate the services of the future. As governments use smart financing to implement these at speed, business and technology will be further disrupted. Infrastructure that is not built ‘WiFi-ready’ will not be able to justify its previous valuations. Depreciation cycles will change as real time data on building and fixed asset conditions becomes available. This will not simply disrupt the accounting profession, but the asset value and associated market capitalisation of companies.

The Cities, economies and businesses that lead the way are going to capitalise not just on the efficiencies for their own domains, but will be seen as thought leaders globally, with the ability to replicate and export this thought-leadership and innovation.

Pending cull of companies not innovating in the digital space

There is also the risk of doing nothing at all. Cisco and Gartner predict that in the next ten years, 25% of Fortune 500 companies will cease to exist in the form that they are in today. There are probably four key drivers in this risk of failure: the first is simply missing this move to digital. Fast following used to be an acceptable technology strategy, but with transitions happening so quickly, board-level questions will need to be asked now about a company’s digitisation strategy.

The second will be an internal inability to re-invent. This huge amount of data will potentially see the end of middle management, as algorithms commodotise work. If companies do not drive the culture of change towards digital across the whole organisation then they will be left with yesterday’s slow and ineffective decision-making processes.

The third is simply being too comfortable doing the right thing for too long. If you own parking garages and fail to anticipate the driverless car transition, your asset value will risk being disrupted overnight.

Finally the focus on customers will be paramount. Apple already drives this to the store floor with personalised check-out services. This intense focus on customised experiences will be the norm for succesful companies and those that do not see this will risk failure. Digital disruptors are waiting in the wings looking for a foothold in the profitable parts of today’s business.

The full potential of the “Internet of Things” will not be realised without universal standards for discovery and communication between devices. The cities and companies that see this first will be the leaders; those that miss this conversion will risk being disrupted.

The Internet of Things is Big, it’s Here and it’s Now. The early adopters will not only be seen as thought leaders but will generate significant competitive advantages to drive business leadership for years to come.

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business Cisco feature IoT
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