Digital Transformation Conversations

Digital Transformation Conversations

Rethinking the organization: why we must do more to prepare for the Internet of Things

There’s real excitement in the transformative potential of the Internet of Things (IoT).  This new age of the machine will see companies create new business models; exploit massive amounts of data; and even build entirely new organizations.  Research firm IDC, for example, estimates that, in 2020, over 40% of all data in the world will be data resulting from machines talking to one another[i]. And along with this transformative potential, there’s a significant prize to be won.  Cisco[ii] and GE[iii] estimate the size of the IoT pie to be over $10 trillion. Given what’s at stake, it’s surprising to report that a swathe of organizations are not ready to benefit from this new machine age.

We found that most organizations are still at a nascent stage when it comes to adopting IoT solutions. Capgemini Consulting researched 100 leading organizations across North America and Europe to ascertain the maturity of IoT solutions. The results were not encouraging. Most organizations were providing the most basic levels of functionality, with less than 30% supporting remote operability and less than 40% utilizing sensor data to offer performance improvement insights. There are also industries that are seriously lagging, with utilities and auto manufacturing firms trailing in the wake of relative leaders such as medical device companies.

There are three common issues that emerge in the assessment of organizational readiness: the failure to monetize, integration with third-party products and services, and building IoT capability.
Failure to monetize. There are some bright spots in this area.  Early adopters, such as GE and General Motors, have used connected platforms to generate service revenues. The General Motors OnStar telematics system generates revenues of over $1.5 billion each year, via paid navigation, security and safety services[iv]. Similarly, GE launched its “Predictivity” line of IoT services in 2012, to help industrial customers manage the data from their connected equipment. Within just a year of launch, “Predictivity” generated $290 million in revenues for GE[v]. However, such bright spots are the exception rather than the norm. Our research shows that less than 30% of organizations generate service revenues from their IoT solutions.

Integration with third-party products and services.  Integrating your service with other platforms means you can tap into a larger ecosystem of services, significantly enhancing the customer experience. Bosch provides a good example here. The German manufacturing major offers remote vehicle diagnostics services to vehicle owners and dealers through its telediagnostics system[vi]. It allows you to exchange information with third-party services, such as car workshops and roadside assistance, thereby making the service even more effective and attractive to the consumer[vii].  However, examples such as Bosch are few and far between. We found that less than 15% of organizations offer integrated IoT solutions with third-party products and services.

Building IoT capability. While a healthy 60% of organizations are forging partnerships to develop IoT solutions, only 10% use acquisitions or develop application program interfaces (APIs) and platforms. There are few examples of companies using the latter approach, with Honeywell and Medtronics among the exceptions. Honeywell offers APIs that allow developers, product integrators and retailers to create custom applications that integrate with Honeywell’s Wi-Fi thermostats. Medtronic follows a different approach – through its acquisition of Cardiocom, a provider of telehealth services, Medtronic is able to use Cardiocom’s expertise to design telehealth services that work with Medtronic’s wireless patient monitoring devices[viii].

So, if these are some of the issues that are holding companies back, what is the recipe for a successful IoT solution? To start, establish the right IT infrastructure, such as alternative data storage architectures that are cost effective and easily scalable. Then, acquire the data analytics capabilities you’re going to need, through recruitment, internal training and partnerships[ix]. Functional capabilities should be strengthened through training; sales forces motivated through the right incentives to sell IoT solutions. You’ll need to enhance product management capabilities with services expertise, by recruiting product management professionals from service-centric industries. Finally, you will also need to get the right customer support capabilities in place.

There’s always a buzz when a disruptive technology starts to transform the way we view the world. And the buzz around IoT is growing in volume. There’s a massive opportunity not just to transform how we do business – but to build entirely new businesses.  It’s an exciting age to be in, but organizations need to accelerate their IoT readiness if they’re not going to be left behind in the new age of the machine. Read more in our report at: The Internet of Things: Are Organizations Ready for a Multi-Trillion Dollar Prize?

 


[i] IDC, “THE DIGITAL UNIVERSE IN 2020: Big Data, Bigger Digital Shadows, and Biggest Growth in the Far East”, December 2012

[ii] Bloomberg, “Cisco CEO Pegs Internet of Things as $19 Trillion Market”, January 2014

[iii] GE, “Industrial Internet: Pushing the Boundaries of Minds and Machines”, November 2012

[iv] Business Wire, “GE Launches 14 New Industrial Internet Predictivity Technologies to Improve Outcomes For Aviation, Oil & Gas, Transportation, Healthcare and Energy”, October 2013

[v] Business Wire, “GE Launches 14 New Industrial Internet Predictivity Technologies to Improve Outcomes For Aviation, Oil & Gas, Transportation, Healthcare and Energy”, October 2013

[vi] SearchAutoParts.com, “Bosch telediagnostics enhances service experience via remote vehicle diagnostics”, January 2014

[vii] Autodata, “Bosch unveils remote diagnostics platform”, January 2014

[viii] Computerweekly, “Inadequate datacentre infrastructure is a barrier to big data analytics”, June 2013

[ix] Capgemini Consulting interviews


About the author

Jerome Buvat

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