The Internet of Things: Where’s the Value?

The Internet of Things: Where’s the Value?

Unless you’ve been living in a cave for the past five years, you’ve probably heard of the Internet of Things (IoT). What is it? Well, it’s hard to tell sometimes. This is one of those parts of technology and business discourse where definitions are difficult to pin down. Most of what we see, read and hear about the IoT has an agenda behind it, and it’s hard to get a clear view of what’s really going on.

I’ve come across dozens, perhaps hundreds, of IoT definitions. Often, there’s talk of IoT as if it were a technology; or as if it were a market (‘the IoT market will be worth $Xbn by 2020’).

Both of these perspectives are wrong. The best way to think about the IoT, at least at first, is as a story.

It starts like this.

“Imagine a world where every physical object has a digital connection to the Internet, and where the information flowing backwards and forwards over those connections is used to improve the environments we work, play, and live in.”

Kind of vague, isn’t it? Difficult to know where to start.

But although it’s tempting to get straight into thinking about technologies (MEMS, wireless networks, sensors, actuators, analytics, gateways, stream processing systems, etc), let’s not – and let’s not start thinking about what the ‘market’ looks like. Not yet. Let’s develop the story first instead.

Individuals, families, populations and systems

The IoT story doesn’t really come into focus until you start looking at specific applications that come alive in particular environments and scenarios. Within a given scenario, a good starting-point is to think about the kinds of value that can come from connecting things together, and then from gathering insights and taking actions from the data that those things could produce.

A good framework for this is to think about the value that can be realised when:

  • You connect one individual object and can observe it or control it remotely.
  • You connect one object of one type to other objects that it might naturally interact with in the physical world. (You might think of this as a ‘family’ of objects).
  • You connect multiple objects of the same kind, and can gather insights about the group as a whole. (You might think of this as a ‘population’ of objects).
  • You can connect multiple objects of the same type, with one or more other types of object. (You might think of this as a ‘system’ of objects).

So – thinking about personal transportation as an example:

  • What happens when you connect one car? Well, for one thing, you can start its engine or switch on the heating remotely.
  • What happens when you can connect a car with a ‘family’ of other related things? This might include its driver (via a smart device of some kind), but also its home garage, its servicing centre, its regular fuel stations, its insurer, and so on. The car can make its wider operating environment (including itself) much more effective and efficient. The value may be multiplied here if you can combine insights with insights from other complementary data sets or streams (for example weather data).
  • What happens when you can connect thousands of cars and gather insights about the population as a whole? Well, you can learn about real operating behaviours of cars of a particular model, and start to predict issues and failures. But you can also use cars’ own sensors in other ways. For example you can ‘crowdsource’ intelligence about accidents, traffic problems, driving conditions, etc. (Take a look at Waze for inspiration).
  • What becomes possible when you connect many cars with many other things at the ‘system’ level? If you think about roads and traffic signals, then smart traffic management, potentially (although today, smart signalling experiments are already running using instrumented roads to sense vehicle traffic.)

Markets and technologies make sense only within the story

Are all these things going to happen? Maybe. Maybe not. It depends on many factors – costs and benefits, competition and potential substitution, privacy concerns, etc. Now of course, these things are all market factors: but note that these market factors are about the development of individual scenarios within the overall IoT story, not the IoT story itself.

The IoT is a story about the future, but it’s also a story about the past and present – we already have significant populations of network-connected objects in the world. And not just smartphones, TVs and the like; but oil and water pipelines, aircraft, cars and other infrastructure.

What makes the difference – and drives excitement about IoT applications – is that today’s and tomorrow’s technology costs are falling, and sophistication increasing: so that many more scenarios involving digitally-connected objects become commercially feasible to explore at scale. This makes existing connected infrastructure scenarios cheaper and easier to deploy at larger scale; and makes new applications of connected objects and infrastructure possible. It also makes it cheaper to interpret large volumes of data from multiple disparate sources, of course.

So yes, ultimately what makes the IoT interesting is the changing nature of enabling technology. But again, it only does so in the context of individual scenarios.

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