Companies investing in IoT should play to their strengths, develop multiple use cases and redesign their existing business practices, according to new research from McKinsey and Company.
The report, What it takes to get an edge in the Internet of Things, is based on a survey of IoT executives at 300 companies, that have moved beyond experiments and have scaled IoT use in their businesses.
The authors argue the strategic importance of IoT has grown, driven by the falling price of sensors and communications technology combined with increased understanding of the technology’s potential to generate insights for businesses.
The research identified three practices that distinguish companies that have successfully integrated IoT into their business from organisations whose projects have stalled.
- Play to your strengths
McKinsey found the most successful companies often played to their strengths—rather than betting on unfamiliar markets or new products they added IoT connectivity to existing products.
Incumbents have an advantage in defining IoT use cases “that build upon existing product lines, as well as their better line of sight on how improvements can create value for customers,” the authors wrote.
- Embrace multiple use cases
The research argues a single use case won’t deliver the early signs of transformation that many companies are hoping for. Instead success requires scale in terms of the number of use cases as well as the breadth of applications.
“Leading companies in our survey implemented on average 80 per cent more IoT applications than laggards. More widespread usage, it seems, forces a cultural shift,” the authors write.
McKinsey argues this scale creates more awareness of the benefits of IoT across the organisation and helps expose the gaps in talent and technology.
“While a smaller scale may be good for very early days, there is a clear learning curve that companies climb as they add use cases—and one that has a powerful impact. Our research shows that a greater number of use cases correlates with economic success regardless of the use case or type of company.”
- Overhaul business processes
IoT isn’t just a technical operation that requires sticking sensors on equipment.
“Connecting production equipment to the internet, for example, will allow a company to manage usage more effectively and predict when maintenance is needed. However, if the surrounding business processes aren’t modified and optimised, then value won’t be maximised,” the authors write.
Successful IoT projects require businesses put in the hard yards and change the way they work. “People have to behave differently, make decisions differently, and operate in a new normal of rapid information flow.”
According to the research, IoT leaders were three times more likely than IoT laggards to say that having a strong ability to manage business-process change was a top-three IoT capability.
Don’t forget security
The authors also warned IoT increases the potential for privacy breaches and data-security risks, since there are many more points of connection for hackers to target.
“These risks need robust and continuous management, and those costs need to be incorporated into projected returns.”
For its part, Gartner has forecasts that worldwide spending on IoT security will reach $1.5 billion in 2018, a 28 per cent increase from 2017 spending of $1.2 billion.