Taking the pulse of
enterprise IoT
A new survey suggests that the enterprise Internet of
Things is poised for strong growth. Here are the trends companies need to
understand.
The past few years have
witnessed a surge of interest in the Internet of Things (IoT)—the network of
connected “smart” devices that communicate seamlessly over the Internet.
Although much media attention has focused on consumer products, some of the
most exciting IoT innovations have occurred within the business sector, where
the combination of sensor data and sophisticated analytical algorithms has
allowed companies to streamline business processes, increase productivity, and
develop leading-edge products.
As with any nascent sector, however, IoT faces much
uncertainty related to regulatory developments, customer demand, and
technological advances. For enterprise IoT, many questions also remain about
its utility and impact, since most companies are still in the early stages of
implementation. To date, they have only achieved modest, incremental benefits
from their enterprise IoT programs. With limited evidence of bottom-line
impact, executives are cautious about increasing their enterprise IoT
investments, and few have embarked on large-scale initiatives designed to transform
their operations or enable new products and services.
This situation may soon change, however. We recently
began surveying business leaders about enterprise IoT adoption, including the
challenges that are preventing them from undertaking more extensive efforts. In
this article, we present preliminary findings from the fifty respondents that
have provided information to date. We will later analyze and present further
findings from about 300 additional respondents (see sidebar, “Our survey
methodology”). The results for the first respondents allowed us to identify
some directional trends that suggest that enterprise IoT is poised for strong
growth because of its ability to improve the customer experience, increase
productivity, and enable the development of innovative products and services.
Enterprise IoT is
gaining momentum
Although enterprise IoT is a relatively new development,
98 percent of survey respondents reported that most companies within their
industry include enterprise IoT initiatives in
their strategic road maps, including those related to improving service
operations, increasing visibility into operations, enabling new business
models, and creating new product and service offerings. Examples of these new
programs in these areas abound. For instance, an elevator company is creating a
suite of IoT-enabled services to improve the reliability of its products and decrease
downtime. In addition to lowering operating costs for the company’s customers,
these applications could potentially transform its business model.
Our survey respondents had a favorable view of
enterprise IoT’s increased importance, with 92 percent stating that it would
have a positive impact over the next three years, either by improving
operations or by allowing companies to develop new products with embedded IoT
capabilities. The latter development could eventually translate into higher
revenues. Equally important, 62 percent of respondents stated that enterprise
IoT’s impact will either be very high or transformative. That means it could
produce many more benefits than the modest improvements seen to date.
Respondents also noted that top executives recognized
IoT’s potential value, with 48 percent reporting that company leaders either
strongly supported or were directly engaged in IoT initiatives.
Enterprise IoT could
produce the greatest benefits in manufacturing and service operations
Enterprise IoT can help improve multiple functions. When
asked which department would benefit most, 40 percent of survey respondents cited
service operations and 30 percent chose manufacturing, making them the clear
leaders. For service operations, respondents believed that enterprise IoT would
produce the most value in three areas: diagnostics and prognostics, predictive
maintenance, and monitoring and inspection. In manufacturing, the top use cases
were resource and process optimization (for instance, improving yield,
throughput, or energy consumption), asset utilization, and quality management.
Challenges persist in
enterprise IoT
Despite these encouraging findings, our survey uncovered
some reasons for concern—particularly with respect to how companies are
using IoT data. Respondents agreed that
information from IoT sensors was valuable, with 60 percent stating that it
provides significant insights, such as data on customer demographics or
shopping patterns. But an almost equal number—54 percent—claimed that companies
used 10 percent or less of this information. These findings are consistent with
the evidence we have seen in the field. At one gas rig, for instance, managers
only used 1 percent of data from the ship’s 30,000 sensors when making
decisions about maintenance planning.
Our survey also uncovered serious capability gaps that
could limit enterprise IoT’s potential. Some of these related to the sensor
data discussed above, with survey respondents reporting that businesses often
struggle with data extraction, management, and analysis. But there were also
significant capability problems in other areas. For instance, 70 percent of
respondents stated that companies have not yet integrated IoT solutions into
their existing business work flows—in other words, they are not using
enterprise IoT to optimize day-to-day tasks. Respondents also noted that
companies had difficulty identifying use cases for enterprise IoT applications
and conducting end-to-end prototyping for connected products.
Addressing these capability gaps may be challenging
because companies often concentrate on piloting a single enterprise IoT
program. With such a narrow focus, they do not consider the big picture,
including the organizational capabilities and change-management programs
required for the rollout of large-scale initiatives. This problem may become
less intense as more business leaders begin recognizing enterprise IoT’s value
and place more emphasis on capability building. We are also optimistic that more
companies will make a greater effort to incorporate enterprise IoT into their
daily operations as its benefits become clearer. A few have already reported
strong gains by moving in this direction. For example, Boeing workers now use
IoT wearables and augmented-reality tools on wiring-harness assembly lines,
which has resulted in up to 25 percent improvement in productivity.
Our preliminary survey findings give reason to be
optimistic about enterprise IoT’s growth. Respondents clearly believe in its
power and companies are demonstrating their support through greater investment
in IoT initiatives. With this shift, enterprise IoT may soon deliver far more
transformational change than the incremental improvements seen to date,
particularly with respect to increased productivity, an improved customer
experience, and the creation of innovative products. To build on the momentum,
executives must give enterprise IoT more prominence during capability-building
programs and when planning work flows—two fairly basic steps that they now tend
to overlook. Such efforts will help enterprise IoT take root and become a tool
for transformative change—and that is what we hope to see as the sample size
grows in our survey.
By
Michael Chui, Vasanth Ganesan, and Mark Patel
http://www.mckinsey.com/global-themes/internet-of-things/our-insights/taking-the-pulse-of-enterprise-iot?cid=other-eml-alt-mip-mck-oth-1707&hlkid=36b3ae01dd984ef6a6cbacb60312c202&hctky=1627601&hdpid=86e3cb0c-1823-4034-8cb8-d2539e259e30
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