Unlocking the potential of the Internet of Things
The Internet of
Things—sensors and actuators
connected by networks to computing systems—has received enormous attention over
the past five years. A new McKinsey Global Institute report, The
Internet of Things: Mapping the value beyond the hype, attempts to
determine exactly how IoT technology can create real economic value. Our
central finding is that the hype may actually understate the full potential—but
that capturing it will require an understanding of where real value can be
created and a successful effort to address a set of systems issues, including
interoperability.
To get a broader view of the IoT’s potential
benefits and challenges across the global economy, we analyzed more than 150
use cases, ranging from people whose devices monitor health and wellness to
manufacturers that utilize sensors to optimize the maintenance of equipment and
protect the safety of workers. Our bottom-up analysis for the applications we
size estimates that the IoT has a total potential economic impact of $3.9
trillion to $11.1 trillion a year by 2025. At the top end, that level of
value—including the consumer surplus—would be equivalent to about 11 percent of
the world economy
Achieving this kind of impact would require
certain conditions to be in place, notably overcoming the technical,
organizational, and regulatory hurdles. In particular, companies that use IoT
technology will play a critical role in developing the right systems and
processes to maximize its value. Among our findings:
·
Interoperability
between IoT systems is critical. Of the total potential economic value the IoT
enables, interoperability is required for 40 percent on average and for nearly
60 percent in some settings.
·
Currently, most IoT
data are not used. For example, on an oil rig that has 30,000 sensors, only 1
percent of the data are examined. That’s because this information is used
mostly to detect and control anomalies—not for optimization and prediction,
which provide the greatest value.
·
Business-to-business
applications will probably capture more value—nearly 70 percent of it—than
consumer uses, although consumer applications, such as fitness monitors and
self-driving cars, attract the most attention and can create significant value,
too.
·
The IoT has a large
potential in developing economies. Still, we estimate that it will have a
higher overall value impact in advanced economies because of the higher value
per use. However, developing economies could generate nearly 40 percent of the
IoT’s value, and nearly half in some settings.
·
Customers will capture
most of the benefits. We estimate that IoT users (businesses, other
organizations, and consumers) could capture 90 percent of the value that IoT
applications generate. For example, in 2025 remote monitoring could create as
much as $1.1 trillion a year in value by improving the health of
chronic-disease patients.
·
A dynamic industry is
evolving around IoT technology. As in other technology waves, both incumbents
and new players have opportunities. Digitization blurs the lines between
technology companies and other types of businesses; makers of industrial
machinery, for example, are creating new business models by using IoT links and
data to offer their products as a service.
The digitization of machines, vehicles, and
other elements of the physical world is a powerful idea. Even at this early
stage, the IoT is starting to have a real impact by changing how goods are made
and distributed, how products are serviced and refined, and how doctors and
patients manage health and wellness. But capturing the full potential of IoT
applications will require innovation in technologies and business models, as
well as investment in new capabilities and talent. With policy actions to
encourage interoperability, ensure security, and protect privacy and property
rights, the Internet of Things can begin to reach its full potential—especially
if leaders truly embrace data-driven decision making.
byJames Manyika, Michael Chui, Peter Bisson, Jonathan Woetzel,
Richard Dobbs, Jacques Bughin, and Dan Aharon
FOR EXHIBITS AND THE FULL ARTICLE SEE http://www.mckinsey.com/insights/business_technology/The_Internet_of_Things_The_value_of_digitizing_the_physical_world?cid=other-eml-alt-mgi-mck-oth-1506
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