The Internet of things, the term used to describe the use of sensors and other Internet-connected devices to track and control physical objects, opens up entirely new ways of doing business. For instance, in manufacturing the application of this technology can reduce maintenance costs by up to 25%, cut unplanned outages by up to 50%, and extend the lives of machines by years.
The Internet of things can also give rise to new business models that could alter the basis of competition. Products that report how they are actually being used can provide much better insight into customer behavior than focus groups. Connected products can even adapt to their customers’ preferences. And the ability to offer almost anything—from a drill press to a car to an aircraft engine—as a service can transform the very nature of what is bought and sold.
In a recent study from the McKinsey Global Institute, it is estimated that 150 specific IoT applications that exist today or could be in widespread use within 10 years could have a total economic impact of $3.9 trillion to $11.1 trillion per year in 2025. It is also estimated two-thirds of value will be generated in business-to-business settings and that business customers and consumers will likely capture more than 90% of the value created.
To capture this value, however, businesses need to overcome three significant obstacles:
- Push technology vendors to provide connected, interoperable components and systems, with analytics;
- Address security and privacy concerns; and most importantly
- Make organizational changes to maximize the operating and strategic benefits that IoT data can provide.
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