What is the buzz all about?  Apparently the Internet-of-Things is poised to become the Next Big Thing. And we need to wrap our heads around it. And I had no idea how far-reaching it was about to become.

When did the Internet-of-Things begin?

A little more than fifteen years ago, when the dot-com boom/bust cycle was well underway, my colleagues and I were busy creating new “virtual stores” that would allow shoppers to buy things without going to a bricks-and-mortar physical store. The fledgling e-commerce world was disrupting the supply chain and store operations, and the cost of moving goods efficiently became paramount.

In response to a need to optimize supply chains, MIT’s Auto-ID Center had academics and founding companies including SAP re-think the movement of goods. They were working on Radio-Frequency IDentification (RFID) tags and other technologies to allow physical things like products, palettes, and shipping containers to identify themselves. The Auto-ID Center’s Kevin Ashton (formerly with Proctor & Gamble, yet another SAP supply chain customer) recognized the potential of what they were doing. By adding sensors to these physical things and networking them together, it was possible to understand the journey from factory-to-customer. By coining the term “Internet-of-Things”, Ashton took the notion of self-identification and smart sensors even further.

The Lowly RFID Tag

What I came to understand was how much further this took the lowly and somewhat misunderstood RFID tag. The point was that technology made it possible to put an identification tag on an item for a few cents, and perhaps for a bit more money, we could embed sensors for temperature, humidity, motion and more.  We could start to understand where the item was, and what it experienced on its journey. Retailers like Marks & Spencer in the UK tested temperature-sensing tags on frozen food to identify spoilage risk, Gillette followed razor blades from factory to store, and apparel manufacturers started source-tagging garments before they left the factory. Shipping containers got sensors and GPS, so goods could be tracked around the planet.

Meanwhile, consumers insatiable demand for higher-speed internet access resulted in near-ubiquitous networking capability in most developed countries. Wireless internet at home and at work bloomed. Combined with ever-cheaper processors, an opportunity emerged to connect new things to the internet. Thus, the Internet-of-Things started to bear fruit.  For under $25, any experimenter could create a smart sensor and put it on the internet. The proliferation of single-board computers such as the Arduino and Raspberry Pi meant you had real computing power that could run just about any program, very, very cheaply. The microcontrollers used on an Arduino could be purchased for a few dollars, and could be coupled with sensors and RF modems to transmit their data.

Will we see IoT adoption?

I had to ask myself why bother?  What possible use would this be? Is this ever going to happen?

As of late 2014, it is estimated there were over 14 billion connected “things”, whether PCs, routers, printers, thermostats, smoke detectors, temperature sensors, and thousands of other devices I was oblivious to.  It is predicted that by 2020, there will be over 50 billion connected things. Already we are seeing cars and trucks with internet connectivity, telematics enabling remote vehicle diagnostics, and smart vending machines that can detect customers and market to them.  The growth is explosive, not linear.

Connect – Transform – Reimagine

So what is SAP’s plan to deal with it?  Three words. “Connect – Transform – Reimagine”.  SAP Internet of Things for Business is a strategy to:

  • Connect with billions of internet-enabled things to gain new insights .. by combining business data with intelligent analysis of new signals from devices, networks, and more
  • Transform the way you make decisions and take action .. by executing operational processes through predictive and automated response all the way to the edge of the network
  • Reimagine your customer’s experience .. by empowering innovative new business models, value-added services and customer-responsive products

As a so-called retail “digital czar”, my role is to understand what this means, how it brings value to our customers. For me, the challenge is to understand the disruptive changes caused by the Digital Economy, how business networks are facilitating new kinds of commerce and collaboration, and how the people, processes, and systems need to adapt and respond.

The “connect” part was easy. Whether it was a Point-of-Sale (POS) terminal, kiosk, motion sensor that wakes up a digital sign or powers up lighting in the freezer section of your local grocer, it was clear.  The murky part was discovering how embedded and nearly invisible Internet-of-Things (IoT) devices were. Like the payment terminal that processes your debit card. Or the energy management system that dims lights and reduces air conditioning. Or the infrared camera that knows traffic is flowing in the centre of the store. Or the “call-for-assistance” button in the fitting room. Or parking lot and loading dock sensors that know when a spot is full. Or the routers and access points that can detect your Bluetooth, WiFi, or smartphone’s signal and identifiers.  Plus the forklift battery charger, conveyors, and smart racking or carousels in the distribution center.

The “transformation” part took me a while – what we’re talking about is being able to use real, hard data that is coming in every millisecond, and use that to influence our behavior, system operation, or how we deal with a situation. Ultimately to do it faster and better with higher productivity than the competition.

The motive to “Reimagine” the customer experience is perhaps the hardest to envisage. But really its about using what we gather from IoT to better serve our customers explicit and implicit needs and wants. As Steve Jobs used to say, customers don’t know what they want. Well, not sure whether  you agree, but I think you see the logic behind using every bit of information that  you can to learn about customer behavior and influence their journey on the path-to-purchase.

With the Jones Hypermarket demo, and other “future store” scenarios, we could heatmap the flow of traffic around the store, and know where people were NOT going, allowing for layout changes. Or predict when customers were going to need something that they had previously browsed.

SAP HANA Cloud Platform for the IoT

The SAP HANA Cloud Platform for the IoT was announced in May 2015, and true to our roots, SAP realized that an in-memory platform-as-a-service offering was what businesses need.  By combining the HANA Cloud IoT Services with HANA Cloud Integration, and the HANA Big Data Platform with in-memory engines, we get a pretty slick way to enable SAP, partners, and customers to create IoT that can scale massively, yet connect to the core business processes they get from SAP business suite and other family applications.

So when we look at the Retail world, the four areas of optimization that I’ve learned really make sense to look at can include:

Optimization Realistic Futuristic
Efficiency

Connected Logistics, Smart Shelves, Predictive Maintenance, Serialized Products

Stock, Replenishment, Waste
Energy Management Store Energy, Fleet Energy, DC Energy Device Energy
Employee Experience Clock-in/Out, Clientelling, Store Heatmap Automation, Health Tracker
Customer Experience iBeacon Offers, Gamification, Smart Vending, Smart Fitting Room, Smart Payment Wearables, Connected Home, Cars, Smart Store

Each of the realistic scenarios is worth a blog of its own, perhaps in the future. The key point here is SAP is ready with the platform to bring all this data in and enable the analysis and response to the data, and to allow you to create your next disruptive competitive advantage.

To learn more,  you can contact me, and visit: http://go.sap.com/solution/internet-of-things.html

I’m very excited by the potential there is for innovation leveraging the Internet-of-Things, and now that I know it can bring efficiencies and help with customer and employee engagement, it seems that it is worth adopting.

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3 Comments

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  1. Glenn Sawyer

    Hello Colin, This is a well thought out article covering the retail spectrum and the IOT opportunity.  IOT and the combined strength of SAP (as the business system of record) will deliver unparalleled competitve advantage for SAP customers.  Thanks for the insight Czar.

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  2. Peter Nickel

    Personally, I see a lot of use of IoT scenarios in the industry, with tracking production machinery, health status of the machines and tracking production batches.

    In retail, it might be depending on the size / financial strength of the retailer, whether he wants to step into it or not. Thanks for the information about further fields, that I wasn’t aware of.

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