How can the IoT impact businesses?
This article will first define what the Internet of Things (IoT) is before discussing its growth and how the IoT may affect businesses, either through the opportunities it provides or the potential risks and challenges it poses.
What is the Internet of Things (IoT)?
Simply put, IoT “refers to a system of interrelated, internet-connected objects that are able to collect and transfer data over a wireless network without human intervention” (Aeris, 2020). In 2014, a Forbes article explained that if a machine (or part of a machine) has an on-off switch, then it can be connected to IoT (Morgan, 2017). A basic example would be a smart TV that can connect to the internet and is able to stream a movie through an application. However, examples are not limited to smartphones, smart TVs, or smart refrigerators; it goes far beyond that (Morgan, 2017).
IoT technology has a number of characteristics that make it useful in many different fields: intelligence, connectivity, sensing, and expressing. Intelligence refers to how these smart products are able to connect to the internet automatically while connectivity allows for the devices to connect with others and for other ‘things’ to connect with them. With sensing, IoT-connected devices are able to detect and/or measure any changes in the environment because of internal sensors. So far, intelligence, connectivity, and sensing all allow for IoT devices to connect and interact with each other. The final key feature, expressing, enables devices to interact and/or communicate with humans. A comprehensive example is the use of IoT in smart farming projects. Sensors are able to collect observational data from soil, atmosphere, crops, and livestock; this raw data is then automatically transferred to the Cloud. Once the raw data is analyzed by various software applications, useful information is presented to users who can then use it to decide what actions need to be taken and which locations need attention (Sciforce, 2020). While this example dealt with farming, the same ideas could easily be applied to any other business.
The growth of IoT
As technology continues to advance, the IoT has shown and continues to show consistent growth. In the 2014 Forbes article, Morgan referenced an analyst firm that estimated IoT connections to be 26 billion by 2020. This number of IoT connected devices is now estimated to grow to 43 billion by 2023 (Dahlqvist, Patel, Rajko, & Shulman, 2019) and according to Ericsson Mobility Report, this number will be over 30 billion as can be seen from the graph below (Figure 1). Additionally, worldwide spending on IoT is forecast to reach 1.1 trillion US dollars by 2023. Finally, new developments such as 5G technology and networks will continue to boost the IoT market growth (Tankovska, 2020). With so many new advancements in technology and connectivity, the possibilities for the IoT are many.
How can the IoT impact businesses?
There are a number of ways in which the applications of IoT can impact businesses, both positively and negatively. On the positive side, the IoT provides numerous opportunities for businesses to expand, adapt to changing environments, and improve business operations. On the negative side, there are a number of risks and challenges that businesses must effectively navigate to make the most out of the IoT.
Opportunities / Benefits
The IoT technology stack has advanced over the past five years — in the meantime, each layer holds significant market growth opportunities. Deviceenablement platforms have an especially strategic advantage of enabling related IoT growth while still in their own growth phase.(Dahlqvist, Patel, Rajko, & Shulman, 2019)
As can be seen below, even large manufacturers and specialist suppliers have dominated smart devices which is the most mature product category, there are still significant opportunities for the other IoT product groups in the market. (Figure 2)
On the other hand, the IoT presents many opportunities for businesses, ranging from gathering data and automating processes, to developing new products or services. The top four benefits are discussed below:
Greater Access to Consumer Data
With the increasing usage of IoT devices, businesses are now able to gain access to more consumer information in order to determine customer trends and behaviors. In the future, these devices might help companies to change the way they are advertising, develop future products according to information collected from their customers, and possibly even directly interact with customers through their devices. For instance, Apple watches collect some health information such as heart rate, blood oxygen level, and more from users. This information can be used to develop new services such as virtual health support and/or some applications which can make emergency calls and share the user location with relevant people.
Improve Customer Engagement
By analyzing the increased consumer information, businesses can improve customer engagement. Interaction features of devices may provide alternative solutions for the customer while at the same time making the company aware of any problems the device has. The company can then better utilize its resources and save time in providing solutions for the product and the customer. For example, the IoT devices in some modern cars are able to notify the driver when any system of a car is failing; at the same time, these devices can also place a call to customer services or even roadside assistance depending on the severity of the issue.
Changes in buying habits
The developing IoT industry also has the potential to change consumers’ shopping style. Most importantly, buyers’ decision-making process will likely shorten with the increasing ease and convenience of making purchases. For instance, using voice commands, a customer can place an order through Amazon Echo to receive goods the same day. In another example, the decision to buy is removed completely with smart refrigerators being able to scan the contents to determine which items are consumed frequently and what is needed. The consumer may simply be notified of what items to purchase or perhaps the refrigerator might even be able to place an online order for them. This change will only benefit companies if they are equipped to keep up with consumer demands in an increasingly shorter timeframe. The competition will be high, and competitors will be forced to innovate to keep from losing business to others who may be faster.
Improved Productivity
The above-noted features and benefits combine to make a number of improvements in productivity. As the IoT allows for businesses to become more ‘hands-off’, they may be able to lower costs such as staff wages, office expenses, and so on, while at the same time increasing production. As a result, companies may be able to offer their products and services at a more competitive rate.
Potential risks and challenges
Although there are a lot of great opportunities that businesses can benefit from, there are a number of challenges and risks that companies need to consider before taking advantage of the technology in their businesses. The two biggest challenges are discussed below.
Security
The biggest risk is underlying security concerns tied to implementing IoT (Hung, 2017). While businesses are implementing the IoT, they must secure the endpoints, the networks, and the data (Patel, Patel, & Scholar, 2016). However, there is still a lack of end-to-end encryption with many IoT devices (Barik, Arora, Parthasarathy, Talreja, & Singh, 2018). Consumers need to be sure that their data is being used and protected appropriately, or they may decide to do business elsewhere. Because the IoT is still fairly new, there is a general lack of standards relating to security, architecture and reference models, and applications (Barik, Arora, Parthasarathy, Talreja, & Singh, 2018). Data leaks, such as the recent LifeLabs or CRA leak, are often reported in the media, and this can impact the reputation and perceived value of the entity.
Technology
The technology is still developing and is constantly changing. While this can be a benefit for innovative companies that lead the market, it can be a challenge for those trying to enter the market. Additionally, as with any new and developing technology, there will be glitches. For instance, there is still a lack of seamless interoperability and sometimes unreliable network connectivity which may impact how and to what IoT devices can connect (Noura, Atiquzzaman, & Gaedke, 2018). This will have an impact on how businesses can effectively use the technology to boost their product/service sales as well as troubleshoot any issues that might arise from technology failures.
Together, security and technology present some business challenges. Due to the high cost of implementing a still-maturing technology, there are few compelling use-cases and viable business models for companies to refer to. In addition, the lack of end-to-end encryption and security risks affect the scalability of IoT and affect smooth data sharing among organizations. (Barik, Arora, Parthasarathy, Talreja, & Singh, 2018).
Conclusion
IoT presents innovation opportunities for companies to create competitive advantages by making their products and services better and cheaper while responding or serving consumers faster (NTT DATA, 2016). As with any new technology, there are opportunities and challenges with implementing it. In addition to considering these prior to making a decision about investing, developing, or outsourcing IoT technology, companies would also need to evaluate whether or not they have sufficient resources, and that use of the technology in their target market aligns with their strategy. All in all, to stay ahead of the competition, businesses need to pay close attention to how new developments can make business processes more efficient and effective, and how these technologies can give the company competitive advantages.
References
Aeris, A. (2020). What is IoT? Defining the Internet of Things (IoT). Retrieved November 05, 2020, from https://www.aeris.com/in/what-is-iot/
Barik, R., Arora, N., Parthasarathy, S., Talreja, A., & Singh, R. (2018). Harnessing the power of Internet of Things to transform … Retrieved October 31, 2020, from https://www2.deloitte.com/content/dam/Deloitte/in/Documents/manufacturing/in-mfg-harnessing-the-power-noexp.pdf
Dahlqvist, F., Patel, M., Rajko, A., & Shulman, J. (2019, July). Growing opportunities in the Internet of Things. Retrieved November 1, 2020, from https://www.mckinsey.com/~/media/McKinsey/Industries/Private%20Equity%20and%20Principal%20Investors/Our%20Insights/Growing%20opportunities%20%20in%20the%20Internet%20of%20Things/Growing-opportunities-in-the-Internet-of-Things-v5.pdf
Hung, M. (2017). Leading the IoT. Retrieved November 2, 2020, from https://www.gartner.com/imagesrv/books/iot/iotEbook_digital.pdf
Morgan, J. (2017, April 20). A Simple Explanation Of ‘The Internet Of Things’. Retrieved November 05, 2020, from https://www.forbes.com/sites/jacobmorgan/2014/05/13/simple-explanation-internet-things-that-anyone-can-understand/?sh=54c269821d09
Noura, M., Atiquzzaman, M., & Gaedke, M. (2018). Interoperability in Internet of Things: Taxonomies and Open Challenges. Mobile Networks and Applications, 24(3), 796–809. doi:10.1007/s11036–018–1089–9
NTT DATA. (2016). Leveraging the Internet of Things for Competitive Advantage. Retrieved November 4, 2020, from https://knowledge.wharton.upenn.edu/article/leveraging-the-internet-of-things-for-competitive-advantage/
Patel, K., Patel, S., & Scholar, P. (2016). Internet of Things-IOT: Definition, Characteristics, Architecture, Enabling Technologies, Application & Future Challenges. Internet of Things-IOT: Definition, Characteristics, Architecture, Enabling Technologies, Application & Future Challenges, 6(5), 6122–6131. doi:10.4010/2016.1482
Sciforce. (2020, July 16). Smart Farming: The Future of Agriculture. Retrieved November 05, 2020, from https://www.iotforall.com/smart-farming-future-of-agriculture
Tankovska, H. (2020, October 28). Internet of Things spending worldwide 2023. Retrieved November 03, 2020, from https://www.statista.com/statistics/668996/worldwide-expenditures-for-the-internet-of-things/