Fitbit fitness tracker. Nest home thermostat. Philips Sonicare toothbrush. LIFX light bulbs. Caterpillar tractors. The Port of Hamburg. What do all these have in common? They’re all part of the Internet of Things, or IoT, where “smart” devices collect and transmit data, which can then be used by either the manufacturer or the consumer to make changes or improvements to the device or to how it’s used.
In this way, IoT businesses no longer simply sell devices, they can also sell services that support or enhance the device, often on a subscription basis. The IoT model has brought about a change in pricing models, too, from a one-times sale to a monthly metered price based on usage.
With almost 15 billion such devices in use today and up to 50 billion projected by 2020 (according to Cisco; Intel projects that number to be closer to 200 billion!), IoT is a huge and ever-growing market opportunity. Gartner expects IoT-related services to garner $235 billion in sales in 2016. And research firm IDC projects IoT sales to reach $1.7 trillion by 2020.
Adding further weight to those forecasts, an IBM survey of more than 5,000 business executives from 21 different industries found that 57% of CxOs surveyed placed IoT among the three most important near-term trends. Studies predict that IoT devices will account for nearly 32% of the IoT market in five years, with the balance consisting of solutions for data storage, security, and software-as-a-service.
Converting products to services
What makes the Internet of Things so disruptive and so compelling? Essentially, it’s the addition of information to enhance a device’s usefulness. Device makers can also add “wrap-around services” and personalize their offerings based on insights into a user’s preferences.
A Nest home thermostat, for example, doesn’t just control the temperature in your house, it learns what your preferences are and programs itself, minimizing energy usage. Connect your Nest thermostat to a Nest Protect smoke detector, and if carbon monoxide is detected, Protect will tell Nest to shut off the furnace, the likely cause of the danger.
For manufacturers, the marriage of data analysis and industrial engineering can bring swift and meaningful improvements. Sensors in the machine can monitor and optimize performance, predict and track maintenance issues, send alerts, even order necessary parts, all resulting in improvements in performance and uptime. Given that some heavy machinery can cost hundreds of thousands of dollars, even incremental improvements in functionality or uptime can significantly impact a company’s bottom line.
Creating smart ports and cities
The German port of Hamburg is taking IoT to the next level, creating a smart port with literally millions of sensors embedded in everything, from the systems for handling containers to street lights. These sensors provide data and management capabilities that allow the port to move cargo more efficiently at each step, address and alleviate parking and traffic jams, and even predict environmental impacts through sensors that detect and respond to noise and air pollution.
Going big in their commitment to IoT, the City of Hamburg has signed a “Memorandum of Understanding” with Cisco to develop specific pilot projects around smart traffic, smart street lighting, infrastructure sensing, and remote citizen services. A number of additional partners are involved as well in creating this “city of the future” that, “can improve how people live, work, play and learn,” according to Cisco’s chief globalization officer.
Investing in enterprise IoT
As the IoT market matures, enterprise solutions (rather than consumer solutions) are predicted to generate the most revenue. Some enterprises are already banking on the huge potential of IoT. For example, IBM recently announced an incredible $3 billion investment over the next four years to establish and grow a distinct IoT business unit.
Forward-thinking businesses would be well to take heed. How can your business take advantage of this burgeoning field of smart devices, data, and insights?