In 2014, the Internet of Things (IoT) made the transition from nerdy esotericism to global phenomenon. It is especially desirable to manufacturing companies that want to connect their products and add new services. With the technology, companies can streamline internal processes, differentiate offerings, generate new revenues, or enhance customer experience. It’s no surprise that these companies can see the business potential. But to achieve success in the long term, they have to understand that IoT is not chiefly a technical enhancement, but an organizational one; the products don’t only have to change, the whole company does.
In this four-part series Robert Brunbäck, CMO at Telenor Connexion, describes why and how IoT is an issue of competence that cuts across a company’s entire organization, and what a company should bear in mind in order to enter into the ‘connected’ world. Each installment focuses on one of these four main divisions of a company, Information Technology (IT), Business Development, Sales & Marketing, and Customer Support, and how IoT is revolutionizing each.
Everything is connected…
The Internet has changed not simply the way, but the fundamental conditions under which we communicate and do business. There are now over three billion people with an Internet connection. But now it’s the turn of ‘things’ to get connected. Sensors that can transmit and receive data are becoming so small, so cheap, and so smart that virtually all physical things can be connected. Anything that benefits from being connected will be: industrial equipment, motor vehicles, electricity meters, light bulbs, heat pumps, jars of pills, hospital equipment, clothes, wristbands for exercise. Right now, only the imagination limits what can be connected and which new services can be created. With this limitlessness, the real question companies should focus on is, “Who will come out on top?”
Who will draw the long straw?
Gartner predicts that in 2017, 50% of the world’s IoT solutions will come from companies that are less than three years old. The fact that fast-moving startups and new digital operators are expected to take such a large slice of the cake should be seen as a wake-up call for the larger, more traditional companies. This ‘50%’ figure is not a coincidence. Companies that have built up their success in the industrial era – not the least manufacturing companies – have spent years, sometimes decades, to optimize their value chains for manufacturing and distributing the best physical products. If they are to continue successfully, these companies must not be afraid to think along new lines.
A connected world is not just the analogue world plus a little bit of new digital technology and the Internet. It is a different world. It is a world where the boundaries between producer and consumer become increasingly blurred. It is a world where we often choose to do business with the brands that offer the best service rather than the best product. And it is a world where traditional value chains are replaced by new value networks, with operators from different industries finding new ways to work together.
These changes are placing new demands on technical infrastructure, employee competence, and – perhaps more than anything else – business methods, if success is to be achieved. Let’s now take a closer look at how this relates to the first of the four central functions of a company: Information Technology (IT).
Part One – Information Technology
First, connecting your products has major consequences for the way a company works with IT. Technical developments in the field of the IoT have moved at a furious pace over the last ten years. Sensors are half of what they cost ten years ago. The costs of bandwidth and processing power are 40 and 60 times cheaper, respectively, as well. In just one decade, it has become financially viable to connect almost any product at all.
Process large volumes of data – in real time!
Processing a rapidly growing amount of sensor data, often collected from many small devices dispersed over a large geographical area, makes new demands of IT. To get the full value from connected products, the IT systems need to efficiently manage the collection, analysis, and visualization of data in real time. But the human operators themselves need to master the most effective methods to do this as well. New procedures and systems are needed that not only guarantee data security for the products that are connected, but also protection of the integrity of people using them. It soon becomes evident that, with the Internet of Things, IT can no longer be an isolated, administrative, reactive department. IT needs to work proactively in close collaboration with all other divisions in the company that contribute to the user experience of the company’s offering.
Acquire or develop in-house?
There are, of course, opportunities to utilize systems such as scalable, cloud-based data storage services from outside the company. It’s not unusual at all. It’s much more unusual for a company to have competence in the development and operation of hardware, software, communication technologies, and interface design all under one roof. But no company can escape the need to acquire at least some internal knowledge of the subject. Exactly which concentration areas are needed depends on the company’s core competence will be in the long term. And this relates closely to what kind of business offering you want to develop.
In the next series installment, Robert will be focusing on IoT’s effects on Business Development.