How the Internet of Things can help companies create true value
Digitization, I believe can offer solutions to the challenges we are facing. My neighbouring city Heidelberg, for instance has optimized its waste management by monitoring the fill levels of their trash bins which in turn allows for real time adjustments to garbage run scheduling. Such cities, thus, are more capable of adapting to city growth while reducing traffic and are better equipped to address global challenges such as urbanization and climate change.
In this post, I will point out how the Internet of Things (IoT) can help companies create value beyond economic success.
Through its ability to facilitate physical objects to sense their environment and interact with each other and business systems, IoT is one of the key elements of digitization. It provides insights that we could not have dreamed of in the past. In an industrial scenario, IoT can be applied to monitor any business relevant resource, be it a material required as input for production processes, auxiliary materials or equipment, energy or labor, and more. Even the end-product could be regarded as a resource in this context. However, adoption of IoT in industry settings spreads slowly and is often applied in niches, stated a recent McKinsey study.
IoT is often not utilized to its full potential.
When following a holistic approach in thinking about value, however, IoT technology can even help you innovate with purpose. In this context, I would like to look at value in three clusters. perspective.
Commercial value ties to the company’s hard facts like operational productivity, customer satisfaction and overall business model. A company applying IoT to prove company vehicles do not leave the premises in order to justify tax reductions is an example of focusing on the commercial side.
The second type of value is human value, which is all about the employees and creating better working conditions, employee engagement and satisfaction. Though somewhat harder to quantify, it is well proven that these improvements positively impact company success. A company putting IoT into practice with a focus on human value might provide sensor-equipped occupational safety vests which monitor health in dangerous environments.
The third type of value is societal value which addresses groups of stakeholders outside the organization, with the group ranging from the neighboring community e.g. when IoT is utilized to warn residents when an area has exceeded emissions thresholds, to national or even global level e.g. in precision farming. This type of value is the hardest to quantify and could also be negative in nature. However, including it can help you in becoming a purposeful, best-run business and implementing IoT in a responsible way.
Combining commercial, human, and societal value will help you unlock the full potential of IoT for your company’s long-term success.
Let me give you some examples of companies following this holistic approach. A company in the telecommunication industry might initially equip their power poles with sensors to gain insights into maintenance requirements. By proactively addressing maintenance, the company ensures zero downtime and quick repairs, increasing resource productivity and improving bottom-line. But it also increases societal value providing reliable access to telecommunication services, also in remote areas. However, their innovation need not stop there. Looking into additional value from their newly gained insights, the company found that IoT helps them to conduct most maintenance tasks remotely, reducing the instances in which their workers must make the dangerous and sometimes fatal climb up the power pole.
In the process industry, IoT might enable a company selling complex shop floor installations to reimagine its business model. Switching to a services-based offering, the company relieves their customers from the responsibility for organizing and maintaining the seamless functioning of the production line, thus redefining customer experience and creating a new revenue stream. With in-depth insights, the company can take over the long-term responsibility and make sure their products are used in the most efficient way over the entire life cycle, creating societal value by contributing to a circular, more sustainable economy. Moreover, the new service offering creates human value as it improved employees’ work-life-balance as site visits are reduced to a minimum.
Utilizing intelligent technologies to innovate with purpose and combine all three clusters of value can make a real difference through generating societal and human value all while taking companies to the next level within the traditional metrics of business outcomes.