What separates leaders from laggards in the Internet of Things PART II
Practice 3: Use advanced end points
IoT hardware can be applied in
various settings to a wide array of devices, such as sensors embedded in heavy
equipment, electronically tagged items traveling along the supply chain,
digital security cameras, and smart household appliances. Some of the most promising
IoT solutions involve advanced technology end points. Augmented and
virtual-reality applications, for example, can feed real-time instructions to
workers based on what they are seeing in the field. Autonomous cars and drones
require dozens of IoT devices, from the many sensors that detect a vehicle’s
condition, location, and performance to the actuators that control steering,
braking, and acceleration. And the wearable devices that people attach to their
bodies monitor activity levels or chronic conditions and feed that data into
software that gauges the user’s health and wellness. We refer to
augmented-reality/virtual-reality devices, drones, autonomous vehicles, and
wearables collectively as “advanced end points.”
Our research suggests that IoT leaders
are more aggressive than IoT laggards in developing applications with advanced
end points: they are doing more with these end points now, and they plan to do
more in the future (Exhibit 4). Moreover, the leaders report high levels of
satisfaction with their efforts to develop applications with advanced end
points.
Exhibit 4 IN ORIGINALARTICLE
Maintain a common sense of direction
To make the most of their
investments in the IoT, companies need to be judicious about integrating IoT
applications into their products and services as well as their internal
operations. Doing that requires a well-defined vision for what the company is
trying to accomplish with its IoT strategy, along with an organization-wide
commitment, anchored in the C-suite, to pursue that vision.
Practice 4: Define how the IoT will create value
Exhibit 5 IN ORIGINALARTICLE
IoT leaders were 75 percent more
likely than laggards to cite the preparation of a strong business case or
articulated vision for value creation as a key success factor for their IoT
programs (Exhibit 5). Without such a vision, companies can find it difficult to
tie their IoT programs to their business strategies or prioritize a coherent
and well-integrated set of use cases. The best IoT visions we’ve seen include a
value proposition (offerings that solve problems for customers better than
what’s available now), a delivery model (a route to market for IoT products and
services, supported by the business and its value-chain partners), and an
economic model (a way for the business to capture some of the value created by
its IoT products and services, while sharing some value with customers).
This forward-thinking stance was
evident at a leading appliance company, which saw an opportunity to grow by
introducing a line of IoT-enabled products. The company took a bottom-up
approach to building its IoT business case. After generating product ideas
based on industry research and survey findings, it rated each idea’s
problem-solving potential for customers and estimated profitability. Then it
assembled a slate of high-priority ideas that it wished to pursue. The company then
worked out how it would share the value of each idea with the outside partners
that would help to build an enabling IoT platform. The company has begun
developing connected products and anticipates that they will generate
substantial revenues within two years.
Practice 5: Spur action from the C-suite
Executive-level involvement appears
to be a factor in the sophistication of IoT programs: 72 percent of the
surveyed companies, all of which have mature IoT programs, have appointed a
member of their C-suite to champion the IoT effort. But the leaders’ IoT
programs are particularly associated with a clear commitment and investment of
time from the CEO. Companies in the leaders quintile were 2.4 more likely than
laggards to report that their CEO serves as the champion of IoT efforts
(Exhibit 6).
Exhibit 6 IN ORIGINALARTICLE
Practice 6: Mobilize the entire company
Comprehensive IoT strategies impose
unfamiliar demands on every corporate activity: developing new offerings,
making and delivering goods and services, selling and supporting what’s been
sold, adjusting the portfolio to seize opportunities and abandon fruitless
efforts, and administering central functions. To implement these strategies,
executives, managers, and frontline workers need to learn fresh skills
and collaborate across business and functional boundaries in novel ways.
For these reasons, it’s important
for the whole company to understand and get behind the IoT strategy. The
difference that organization-wide commitment makes can be stark. The IoT
leaders in our survey were more likely than laggards to say that strong
alignment with IoT strategies and priorities across the organization is a key
factor in the success of their IoT programs.
Be practical in execution
IoT leaders are not only more
ambitious and better coordinated than their peers. They also take a decidedly
practical approach to executing their IoT plans. Instead of chasing
breakthrough opportunities far beyond their core business, they use IoT
applications to augment their existing offerings in ways that customers value.
They don’t expend effort and money to create advanced technologies if they can
source those technologies more easily and inexpensively from outside partners.
And they guard carefully against the cybersecurity risks that inevitably arise
as they establish digital connections to thousands, if not millions, of end
points.
Practice 7: Start with existing offerings
Besides transforming their business
processes to capture value from the IoT (practice 2), companies can generate revenues by
either adding connectivity to existing products or creating new connected
products. IoT leaders strongly favor the former approach. According to our
survey, IoT leaders are three times more likely than laggards to say that their
top IoT priority is adding IoT capabilities to existing products (Exhibit 7).
Exhibit 7 IN ORIGINALARTICLE
One agricultural-equipment maker
chose to play to its strengths by making R&D investments aimed at
IoT-enabling products and services in existing lines of business. These
investments resulted in a new system that used on-farm sensors to continuously
read soil conditions and irrigation levels and relay the information to a
cloud-based analytics platform. Farmers could then monitor real-time variations
on their mobile devices and optimize their water and fertilizer use. That, in
turn, increased yields while substantially reducing water, fertilizer, and fuel
costs. As the equipment maker added users, it took advantage of the growing
quality and breadth of data to improve the capabilities of the system, and
thereby increase its value to farmers.
Practice 8: Tap into an ecosystem of partners
The preferences of IoT leaders
suggest a greater willingness to draw capabilities from an ecosystem of
technology partners, rather than rely on homegrown capabilities. When it comes
to choosing the IoT platform that will best meet their needs, IoT leaders
follow an approach that is different from that of laggards.
While laggards and leaders are
equally interested in the software-development environments supported by IoT
platforms, leaders are more likely to choose IoT platforms according to whether
they support third-party developers and the advanced end points that are
integral to practice 3 (Exhibit 8). Perhaps because these capabilities are so
sophisticated, leaders are more likely than laggards to turn to outside
partners for their IoT platforms. And while 90 percent of all IoT users at
scale say they are using third-party IoT platforms, the leaders are 40 percent
less likely to require that their IoT platform runs on-premise rather than in
the cloud.
Exhibit 8 IN ORIGINALARTICLE
Practice 9: Prepare for cyberattacks so they don’t slow
things down
IoT leaders and laggards say that
they suffer similar consequences from cyberattacks: 30 percent of respondents
from each group said that a cyberattack had resulted in high to severe damage.
But a higher percentage of the leaders said their companies had been the target
of cyberattacks (57 percent, versus 44 percent for laggards). This could be
because the leaders’ larger numbers of IoT use cases give them a more expansive
attack surface. Nevertheless, IoT leaders are much more likely to say they are
confident about their ability to handle cyberthreats (Exhibit 9). While we didn’t ask them why, our
experience suggests that companies usually ramp up their levels of
cybersecurity protection after experiencing cyberattacks, which could leave
them feeling surer of their ability to withstand subsequent attacks.
Exhibit 9 IN ORIGINALARTICLE
Our survey results point to an
important lesson for companies working with the IoT: succeeding at scale
depends greatly on sound decisions about business fundamentals—strategy,
leadership, investment, organizational change, partnerships—and not just on
decisions about technology. This is not to say that technology doesn’t matter.
It does, of course; IoT leaders pay a great deal of attention to technological
matters, from choosing platforms and assembling capabilities to preparing for
cyberattacks. The difference is that IoT leaders complement their technological
prowess with business discipline and a bold, enterprise-wide commitment to a
well-defined course of action.
By Michael Chui, Brett May, Subu Narayanan, and Ridham Shah
https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/what-separates-leaders-from-laggards-in-the-internet-of-things?cid=other-eml-alt-mip-mck&hlkid=6e4d05a8320e4413b4a3065bfc3a9b84&hctky=1627601&hdpid=55f995b7-10a7-4fe0-9618-999f03e7315c
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