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The Business Case for the IoT

Would you like a piece of a $13 trillion pie? That’s how much an expected, world-wide, $6 billion investment in IoT solutions will generate by the year 2025.

The predictions and statistics around IoT are numerous and impressive. We can experience it in our homes, and have watched as disruptors reshape industries, or create new ones, with businesses built around it. But there is more to IoT than big numbers and high profile companies - it’s giving businesses of all sizes, in a broad range of sectors, more visibility and control over their operations than ever before.

We explored:

  • What an IoT solution involves, and the business case for implementation
  • The industries and businesses implementing IoT
  • The benefits and impact of an IoT solution on business models   
  • Legal and security issues associated with data collection, storage and exchange

With panelists:

  • Anat Efron, Ecosystems Director ANZ - Thinxtra  
  • Matt Sinclair, Senior Technology Specialist - Telstra
  • Travis Crothers, CEO & Cofounder - Creator Global
  • Patrick Duffy, CEO - E Agri

Where did IoT come from, and what exactly does it mean?

As early as the year 2000, LG announced plans for an internet refrigerator, MIT spin-offs developed a device that monitored the Dow Jones, personal portfolios and the weather, and in 2008 the U.S. National Intelligence Council listed IoT as one of six disruptive technologies.

IoT, like many emerging technologies, has been evolving in the background for decades, becoming a fully-fledged buzzword thanks to disrupters like Amazon and Uber, and established brands like Heineken.  

IOT Google Trend interest over time.png

IoT - or the Internet of Things - simply refers to the connection of multiple devices to the internet. There are three layers to IoT:

  1. Physical: the hardware (sensors and networking gear) that make a device
  2. Network: transmits data collected at the physical layer to other connected devices
  3. Application: protocols and interfaces used to identify connected devices, and facilitate communication (data exchange)

Applications generally fall into two broad categories:

  1. Information and analysis (i.e tracking behaviour)
  2. Automation and control (i.e. process optimisation)

By emerging tech standards, it is one of the simpler concepts to understand, and yet it’s impact on business models and industry, as well as daily life, is complex and varied.   

So why would a business implement IoT?

Save time. Save money. Save lives. Save business.
It’s an impressive premise, and the benefits of an IoT solution may not achieve all of the above, but it’s likely to achieve at least one. The greatest benefit of the three layers is visibility, which delivers on two fronts: data and control.

Data
Exchanging data between multiple devices is delivering businesses real time analytics and copious amounts of data, shining a light on systems, processes, or behaviours that had previously been obscured.

It’s enabling businesses to revolutionise the way they track and manage inventory, improve processes to increase productivity, monitor behaviours through space and time and enhance decision-making.

Control
Connecting devices to a central point is enabling greater control over more of a business. For example, atmospheric control over crops in Hong Kong is now possible from an office in Sydney, or continuous monitoring and adjustment to manufacturing lines. It also allows for the development of complex autonomous systems, like collision avoidance systems in driverless cars.

Which businesses are already implementing IoT?

Current applications can be seen in both disruptors and established businesses.  For disruptors, like Uber and Amazon, IoT is at the core of their business model with everything being built around it.  Established businesses and industries aren’t excluded from this though, and are finding ways to adapt through implementing their own IoT solutions.   

General Electric
GE freed up assets by selling its appliance business and divesting from financial services, to fund subsidiary, GE Digital’s transition into industrials and software, repositioning itself as a services company.  Their platform, Predix, collects and analyses data from industrial machines, adding another letter to the IoT acronym - IIoT, Industrial Internet of Things.  By focusing on a consumption and cloud-based approach, driven by OPEX rather than CAPEX, they’re estimating the industrial internet will be worth $225 billion by 2020.

Qantas
The arrival of bag tags was sold as a perk for frequent flyers - a way for them to save time during check-in and ensure the easy relocation of their lost luggage.  In actuality, bag tags are an IoT solution - microchip sensors connected baggage with a central system, monitoring and collecting data on the baggage handling journey. It streamlined the check-in process, resulting in reduced manpower, reduced costs and reduced time.

Rolls Royce
Rolls Royce began by applying sensors to its jet engines, providing real-time data, reporting on engine condition and allowing remote maintenance. Last year they announced a collaboration with Microsoft where Azure IoT and Cortanal Intelligence suites were integrated into TotalCare Services, responsible for engine reliability and maintenance. TotalCare Services can monitor and report on aircraft engine conditions, proactively address issues, and thereby minimise the disruption and cost of maintenance. The benefit and applications of IoT have led to the restructuring of support contracts for the company.

Agribusiness
The world will need to produce 70% more food in 2050 than it did in 2006. Add to this a recent IBM study which found that 90% of lost crops could have been prevented - this is where precision agriculture comes in to play. In perhaps the perfect example of both data and control, IoT devices are allowing farmers to optimise yields and improve produce quality. Sensors provide maps of topography, resources and environmental variables, smartphones track equipment and livestock and drones survey land. OnFarm, an American platform provider, found that precision agriculture increased yield by nearly 2%, reduced energy costs and water usage.

How does a business implement an IoT solution?

The range and types of IoT solutions are broad and varied and as a result so too are the methods of implementation, but there are some key tips:

1.Identify the problem
Developing a problem statement that has buy-in from all stakeholders, is crucial to determining a solution that will be successful, IoT or otherwise.

2. Define what success looks like
By understanding what success looks like to your business, you’re also managing expectations and defining its value. Take it a step further by breaking down the success into increments - what does success look like in 3 months? 1 year? 5 years? Once the solution has been determined, then costs can be modelled.

3. Reframe costs as an investment
As one might guess, IoT is not cheap, often involving the extensive installment of hardware and technical upgrades. The costs can be staggered however, and savings identified in areas of less value. Whilst IoT is an emerging technology, it is a long-term solution and costs should be considered an investment. Where one might upgrade iPhones every 12 months, the physical, network and application layers should last 10-15 years.

4. Keep your stakeholders engaged and educated
Having supportive and informed stakeholders is important to any business transformation or project. Keep them engaged through the process but educate them at each step, and manage expectations. IoT solutions, as we will touch on below, will impact businesses beyond the scope of the problem, or the solution and it is important to prepare stakeholders for this (without scaring them!).  

5. Consider maintenance capabilities and security
While being on the cutting-edge of software stacks (like MQTT, and M2M) is important, like the iPhone, there will always be an upgrade in the wings. For this reason, it’s more important to consider your maintenance capabilities alongside of your solution.

An important, but often neglected component is security. An IoT solution collates more data than a business is likely to have ever had before.  It will reveal sensitive, competitive information about operations, financials and customers. Securing data should be a priority that is discussed as early as possible.

What is the effect of an IoT solution?

IoT solutions have a domino effect. The deployment of the solution often requires a digital transformation, which can lead to an evaluation of existing systems and processes. The structure of a business can change before the first device is even installed, then once the solution has been deployed, the insights often lead to further growth and change.

In the cases detailed earlier, the very nature of GE’s business shifted, Qantas reduced staff on the ground at check-in, and Rolls Royce restructured their service offering. Expectation management and education are important in ensuring business leaders are as prepared and open as possible to the changes ahead.

What are the legal considerations of businesses collecting data via IoT?

Data is one of the key assets a business will gain from an IoT solution and legally they are likely to own it. While a solution might be rolled out by a supplier, or stored on a platform like Predix, it is still the asset of the business.  

Businesses do need to be careful however, when their data source is the customer - their personal details or behaviours.  In fact, one of the reasons IoT isn’t as common in the health industry as it is in others, is due to privacy issues. While selling raw data isn’t particularly lucrative there is a market for data exchange, so ensuring that you frequently seek customer permissions and securely store their data is imperative.

We’ve hear the big-business cases, but is IoT scaleable for SMEs?

In short, absolutely.

IoT is not just for the large-scale industry titans, or savvy Silicon Valley disruptors. IoT is an opportunity for SMEs to grow and change the way they do business. Because of their size, they are often nimble and more adaptable to the changes and impacts of an IoT solution, which can be introduced in increments. These same characteristics mean that SMEs can also act as a testing ground for new solutions, offered by providers like Telstra. In turn, an incremental approach allows for more manageable costs, where they can start to realise the benefits more quickly.