IoT in Phases Part One: We Are No Longer a Bank, But a Technology Company
“I have the feeling we are no longer a bank, but have become a technology company,” said a CFO of a huge bank recently. He might be right. Let’s see why. In a previous article, I mentioned the staggering economic impact the internet of things (IoT) will have. However, that assumes the issue of interoperability is further evolving into ‘the dinosaur’ of integrated IoT applications.
For various reasons, the interoperability of IoT applications will be evolving during time:
- The adoption curve that enterprises have towards IoT. It will take time before enterprises fully realize the value of IoT to their market or industry. A huge amount of enterprises will wait for the market to become more mature before seriously investing in interoperable IoT applications
- The technical complexity of IoT applications to get the interoperability in place. Today, many queries regarding the technical complexity, TCO, development costs or roll-out plans are not fully understood, which causes enterprises to wait or focus on getting the info to the survey. The good news is that the required – cloud – platforms and analytics capabilities today are mature and ready to start on IoT.
- Enterprises require proof—proof of the return on their investments and deployments. Due to the above reasons, enterprises today primarily decide to start IoT initiatives incrementally and focus on customer-centric or industry-specific IoT initiatives first.
Back to the quote about the CFO feeling his bank transferred into a technology company. Of course his thoughts are built upon the Digital Transformation that his bank is going through. Digital Transformation is now a core strategy for almost all enterprises, and it better be.
It starts with the mandate of the enterprises executive committees often driven by a fear of digitally enabled competitors. The starting point for Digital Transformation that enterprises typically choose is innovating the customer experience. They focus first on offering their customers a new digital experience on their products and services. And IoT is an important way to do so. According to IDC’s Global IoT Decision Maker Survey, some 58% of global enterprises believe IoT is strategic to their business.
IoT Phase 1—Innovating Customer and Consumer Experience
IoT initiatives as part of Digital Transformation will enter the market in phases. The first phase currently going on is the phase of innovating customer and consumer experience. Instead of being IoT projects, the initiatives are strongly related to use cases. Use cases that are industry specific and deliver specific value. Analytics plays a dominant role here: not only to monitor and interpret the IoT-devices information, but also to apply the closed loop principle and start predicting and planning IoT insights.
IoT Phase 2—Adding Business Value
In a second phase, enterprises will further leverage their IoT investments from phase I by adding more business value. Adding business value is done by adding, brokering and blending enterprise and environmental data to what’s already available via the IoT application. Here, business analytics is core!
Analytics though offers the capabilities to extend the IoT value from customer experience into product and customer optimization. With analytics, enterprises explore the insights by combining IoT information to other business process data, or create business value by blending towards data from outside the organization like social media, weather, or market information.
In this phase, the IoT device insights are further enriched with corporate or non-corporate data to leverage numerous domains like:
- Product design and development
- Supply chain optimization
- Basket analyses in retail
- …and more
IoT Phase 3—Full Interoperability
The third phase of IoT applications will be to complete full interoperability with other IoT applications. This is the phase that has an enormous economic impact. Interoperability allows for complete new business models, of which offering “products as a service” is a key one. Reminds me of the compressor manufacturer that stops selling compressors but starts selling compressed air, and the hospital that starts reimbursing its patients based on health-added-value.
- 2016: Innovating the customer and consumer experience
- 2016-2018: Extend IoT business value
- 2021: Interoperable IoT
In my next blog post, I’ll take a deep dive into the first two phases of IoT and cover four industries that show specific intention for IoT initiatives in both phases. Stay tuned!